Hedge funds suffer July losses as tech bets unravel

The losses were largely fueled by the aggressive unwinding of tech positions that had become too crowded to exit efficiently when market sentiment soured. While multi-strategy funds managed to limit their monthly decline to 2.2%, specialized stock pickers in the Asia-Pacific region faced a steeper 9.4% loss. Quantitative equity funds, which prioritize market performance metrics over fundamental corporate health, recorded a 5% drop. JPMorgan identified these quantitative firms as the most leveraged strategy in its tracking, operating with an assumed leverage level of 450%.

Goldman Sachs corroborated the difficult climate, noting that July marked the second-worst monthly performance for global stock pickers in four years, with Asia-based managers seeing their worst results on record. The pattern of dumping U.S. stocks during the mid-summer period is becoming a distinct trend; JPMorgan noted that this year’s de-grossing was more aggressive than any period since 2020 and 2022. Despite the recent volatility, hedge fund borrowing remains near five-year highs, suggesting that while specific momentum trades collapsed, the broader appetite for leverage has not yet vanished from the market.