Hedge Funds Underperform S&P 500 After AI Slowdown

Thansettakij•Economy•5d ago

Reader Briefing

Goldman Sachs reports that hedge funds experienced historic underperformance against the S&P 500 in July as AI momentum faded.

•Hedge Fund VIP lists saw their worst one-month underperformance relative to the S&P 500 in over 20 years during July.
•Goldman Sachs observed a rapid de-grossing of total investment positions by hedge funds, the fastest in a decade.
•Hedge funds have begun diversifying away from AI after heavily concentrating portfolios in AI during the previous quarter.
•US equity hedge funds using Long/Short strategies returned 10% through mid-August.

•Goldman Sachs stated that hedge funds faced historically poor performance following a slowdown in AI stock momentum in July.
•The Hedge Fund VIP list, consisting of the most popular Long positions, saw the most severe one-month underperformance compared to the S&P 500 in over 20 years.
•Hedge funds engaged in one of the fastest reductions of total investment positions (de-grossing) in a decade during July.
•Ben Snider and Goldman Sachs strategists noted that funds reduced positions in several AI stocks, including many semiconductors and most of the largest companies.
•Hedge funds shifted portfolios at the highest level since 2021 to diversify away from artificial intelligence (AI).
•In the second quarter, 14 out of 20 "Rising Stars" stocks—those most popular among hedge funds—were technology stocks.
•Gross leverage, net leverage, and AI investments decreased from second quarter peaks but remain above long-term averages.
•US equity hedge funds employing Long/Short strategies achieved a 10% return by mid-August.

Full article content is available on the original source.

Goldman Sachsℹ️

The organization that provided data and analysis on hedge fund performance and AI investment trends.

Ben Snider

A strategist at Goldman Sachs who led the analysis on hedge fund position reductions in AI stocks.