Tech selloff wipes out hedge fund gains, prompting risk cuts and layoffs

Technology stocks have plummeted, erasing substantial gains made by hedge funds in 2026, according to a recent report. The equities selloff, primarily impacting tech-focused funds, caused some managers to reduce their risk exposure and cut investment teams. On Thursday, equity long-short funds that primarily invest in tech experienced a loss of more than 4 percent, leaving annual returns flat, as per Goldman Sachs estimates.

Tech long-short managers were down 1.3 percent on average, while multi-strategy managers dropped 1.4 percent on the day, multiple sources reported. At the heart of the industry's current woes is $17 billion hedge fund Walleye Capital, which announced it would reduce its equity long-short business and the size of its equity investment team following a tough month since March 2020.

Several large multi-manager hedge fund platforms have already cut leverage and laid off loss-making teams in recent weeks, with more expected if declines persist. The market turmoil following the US midterm elections added to the losses, with the Nasdaq 100 index, a key index containing many tech heavyweights, dropping 6.6 percent last month.