Hedge fund losses from crowded trades
Analysis based on 6 articles · First reported Apr 20, 2026 · Last updated Jul 09, 2026
The selloff in crowded trades, especially AI-related tech stocks, has reduced hedge fund leverage and returns, potentially dampening market liquidity and increasing volatility. The tech sector, particularly chipmakers like Micron Technology, Intel, and Marvell Technology, may face further pressure as funds unwind positions.
In July 2026, hedge fund managers experienced their worst trading results in nearly a year due to crowded trades in volatile markets, according to Goldman Sachs. Systematic (quant) funds lost a quarter of their year-to-date returns, dropping from 14.4% to 10.8%. Losses stemmed from bets against U.S. equities, Asian developed-market stocks, and European stocks. Volatility in chipmaker shares, amplified by retail investor leverage in South Korean markets, contributed to the downturn. Fundamental (stockpicking) funds also fell 2.2% but remained up 15.5% for the year. Regulators including the United Kingdom — Bank of England, Japan — Bank of Japan, and International — Bank for International Settlements had warned about high tech valuations. Hedge fund leverage fell to its lowest in a year as managers fled AI-related trades.
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