Walleye Capital to cut investment team after tech-sector slump — Channel NewsAsia

In the United States, a global stock sell-off led by the technology sector has erased many hedge funds’ gains since the start of the year and forced some managers to reduce risk and cut teams. New York-based $17 billion multi-strategy hedge fund Walleye Capital said it intends to scale back its in-house long-short equity investment unit and a significant part of its equities team.

Walleye Capital’s decision

Channel NewsAsia reports, citing Reuters. In a letter to investors reviewed by the agency, the fund said it had reassessed every aspect of its operations after its worst month since March 2020. Walleye Capital also plans to return part of its capital.

According to market participants, several large multi-manager hedge fund platforms have already reduced leverage and laid off teams with loss-making results in recent weeks. They expect further cuts if the market downturn continues.

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Hedge fund losses

According to Goldman Sachs estimates, long-short funds that primarily invest in technology companies lost more than 4% in one day. Their year-to-date returns fell to approximately zero, although they had reached a peak of 24% in June before the sell-off in stocks linked to artificial intelligence.

Global fundamental long-short managers lost an average of 1.3% on Thursday, while multi-strategy managers lost 1.4%, Goldman Sachs said. The Nasdaq 100 index, which includes large technology companies, fell 6.6% in October, its biggest monthly decline in 18 months. JPMorgan estimated global hedge funds’ losses for October at 3%.

Research firm PivotalPath warned of significant and increasing overlap in the positions of the 10 largest multi-strategy hedge funds. In the company’s view, a simultaneous exit from positions by these funds could affect many of the same securities.