AI selloff hammers hedge funds this week, Asia managers lead losses

TOKYO, Oct 16 (Reuters) - Global hedge funds suffered steep losses this week, according to a Goldman Sachs prime brokerage note, battered by the violent unwind of a swathe of AI bets, with Asia-focused funds hit the hardest. Investors are increasingly questioning whether massive AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high. Global fundamental long-short funds, or stock pickers, lost money every single day this week, Goldman Sachs said, with losses for the week to October 15 coming to 2.9%. For the year to date, though, they have gains of 14.3%. On Wednesday, hedge funds across strategies retreated sharply, with stock pickers globally losing 0.9%. Among them, Asia-focused managers were down 2.6%, while tech-focused funds were off 2.0%. Global systematic long-short managers and multi-strategy funds also declined roughly 1%. Hotter-than-expected US inflation data this week that increased expectations of further rate hikes also fuelled the selloff in semiconductor and AI supply chain stocks. "From COVID through end-2025, all three broad strategies never fell more than 80bps on the same day," Goldman Sachs said, adding that this has now occurred three times this year, on February 4, July 28 and October 15. Semiconductor-heavy markets bore the brunt of the selloff. South Korea's benchmark KOSPI (.KS11), opens new tab tumbled 8% to close at a six-month low on Thursday, while Taiwan stocks also lost more than 3%. Asia-focused stock pickers have lost 6.8% for the first half of this month and have erased more than half of the gains from their late-June peak, when they were up more than 40% for the year, according to Goldman Sachs. Reporting by Summer Zhen and Anirban Sen; Editing by Edwina Gibbs Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * China Summer Zhen Thomson Reuters Summer Zhen is a Hong Kong-based correspondent for Reuters, specializing in hedge funds and financial markets in Asia. She has over a decade of experience in financial journalism and the finance industry. Before joining Reuters, Summer was an investor relations professional at a hedge fund and worked as a business reporter for the South China Morning Post. She was the winner of Best Young Reporter at the 2014 Hong Kong News Awards. Anirban Sen Thomson Reuters Anirban Sen is the Editor in Charge of Market Structure at Reuters in New York where he leads the news agency's coverage of stock exchanges, and market-making firms including Jane Street and Citadel Securities. Previously Anirban was M&A Editor at Reuters, leading a team of reporters who regularly broke market-moving news about the biggest deals in corporate America. Some of his scoops have included Mars' $36 billion deal for snack maker Kellanova, design software firm Synopsys' $35 billion deal for Ansys, and buyout firm GTCR's $18.5 billion deal for merchant services provider Worldpay. In 2023, Anirban was part of a Reuters team that won a Gerald Loeb Award for the agency's coverage of the collapse of FTX. After starting with Reuters in Bangalore in 2009, he left in 2013 to work as a technology deals reporter in several leading business news outlets in India, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 as Editor in Charge, Finance, to lead a team of reporters in India, covering everything from investment banking to venture capital.

AI selloff hammers hedge funds this week, Asia managers lead losses

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