Marshall Wace funds fall as October market rout hits hedge fund returns

Marshall Wace experienced losses in two of its key strategies during October as market turbulence impacted hedge fund returns, according to the Financial Times. The $80 billion London-based firm saw its Eureka strategy dip 5.4% and its year-to-date return drop to 5.3%. The systematic Tops strategy fell 3.6%, yielding only 1.3% for the year.

This decline mirrors the broader weakness within the hedge fund industry, with global managers collectively declining by an average of 3% in October, as per PivotalPath data. Equity-focused strategies suffered the most, with performance concerns over AI investments leading to a rapid shift out of tech positions. The Nasdaq 100 entered correction territory, sliding 10% from its October 6 peak, as disappointing earnings and AI-related capital expenditure worries dampened investor confidence.

Intel, a semiconductor maker, saw a significant 29% single-session drop. Volatility also spread to fixed income markets, with oil price hikes and French political uncertainty driving sales in French and Italian bonds relative to German Bunds. The widening spreads complicated relative-value and arbitrage tactics used by macro and fixed income hedge funds.

Graham Capital Management's discretionary macro strategy declined 1.8% in October, reducing its annual gain to 1.2%. However, its quantitative macro strategy fared better, posting a slight monthly loss while holding a 21.6% gain for the year. The downturn underscores the growing performance disparity among hedge fund strategies as managers navigate technology sector setbacks, rising interest rates, and geopolitical uncertainty.