Hedge Funds Slashed Jobs And Dumped Trades After Market's Thursday Rout

Hedge funds are cutting investment teams and abandoning trades after October's market rout inflicted losses across the industry, with Thursday's technology selloff deepening a retreat that had already erased substantial gains, The Wall Street Journal reported.

The pressure extends from funds investing in artificial intelligence and healthcare stocks to firms trading risky corporate debt. Managers are shrinking businesses, reducing borrowed money and, in some cases, preparing to return capital to investors.

Stock-picking hedge funds unwound positions in October at the fastest pace in more than a decade, according to a Morgan Stanley client note cited by the Journal. Their market exposure has fallen about 9% since June.

More than 40% of those funds were flat or losing money for the year through October, Morgan Stanley said, even as the S&P 500 and Nasdaq Composite remained positive for 2026.

The widening damage is reshaping some prominent firms. Samlyn Capital, which manages approximately $7 billion, is concentrating on financial-services stocks, prompting departures among investment employees and leaders covering other sectors, the Journal reported, citing people familiar with the firm. Its fund lost about 5% through October.

Engineers Gate, a roughly $4 billion firm launched by Glenn Dubin, is closing most of its "quantamental" business, which blends human investment judgment with quantitative methods. All but five portfolio managers in that strategy are being cut, and business head Mike Daylamani is leaving, according to the report.

The firm, run by co-founder Greg Eisner, remains focused on quantitative investing. It was down in the mid-single digits through October, the Journal reported. Bloomberg previously reported staff reductions there.

At Lone Pine Capital, the reversal has been especially severe. Its hedge fund gained more than 40% during the first half before enduring its worst quarterly stretch in the third quarter, according to a person familiar with the firm cited by the Journal.

An additional 8.8% loss before fees in October left the fund down 7.5% before fees for the year. Lone Pine managed about $19 billion as of September. The firm's investor letter attributed the damage to falling AI stocks and unsuccessful bets against companies it considered threatened by the technology.

Those companies' shares rose instead, hurting positions intended to profit from declines. Thursday brought another blow. Funds focused on telecommunications, media and technology lost more than 4%, Goldman Sachs told clients, essentially wiping out annual gains that had reached as much as 24% before the summer AI retreat.

Multistrategy funds, which invest across different markets and approaches, lost 1.4%, Goldman said. "Hug your hedge fund manager," Third Point founder Dan Loeb joked on X after Thursday's rout erased approximately $2.5 trillion in Nasdaq Composite market value, according to the Journal.

Walleye Capital also dismissed several stock-picking portfolio managers after its worst month since March 2020. The firm, which had overseen more than $17 billion, told investors it planned to return some money after reviewing its optimal size.

Elsewhere, Arini Capital Management sharply reduced debt investments, partly because banks demanded additional collateral through margin calls, the Journal reported. The retreat can compound pressure on investments held by multiple firms: As managers close similar positions to contain losses, their selling weighs on trades other funds still own.

Earlier reductions in leverage provided some protection. A bank executive who works with hedge funds told the Journal that Thursday's losses could have been worse had managers not already reduced borrowing.