Hedge funds give up half of 2025 gains in 'challenging' markets, says Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) -Hedge fund stock pickers and multi-strategy funds gave up around half their average yearly gains in Thursday's tech-driven equity selloff, a note by Goldman Sachs showed. 

Wall Street shares have been hit this week by a darkening U.S. economic outlook uncertainty over President Donald Trump's tariff policies, with the Nasdaq on Thursday confirming a correction since peaking in December.

Stock plunges were felt acutely in the parts of the markets where hedge funds held long bets such as on technology, media and telecommunications companies. 

Global hedge funds were mostly long these stocks coming into this week, said a separate note from JPMorgan on Wednesday. A long position expects an asset value to rise whereas a short bet hopes it will decline. 

Technology is the second worst-performing S&P 500 sector year-to-date with about an 8% loss, after consumer discretionary stocks which have tumbled just over 9%.

Hedge funds were caught in crowded trades that sold off leaving those which pick stocks with a 1% average return on the year so far, said the Goldman Sachs note sent to clients on Thursday and seen by Reuters on Friday. 

U.S. stock pickers finished down 1.4% on Thursday, taking their yearly performance to negative 0.5% for 2025, so far, the note said.

Hedge funds that employ different kinds of trading strategies also had "a challenging day," said the Goldman note. 

This kind of hedge fund which for the last three years has produced consistently positive returns has this year lost money 18 out of 29 days since January 27, said Goldman. 

This negative investment streak was one of the worst performances for this kind of hedge fund that the bank had ever seen, said Goldman. 

Multi-strategy hedge funds are designed to offset the losses of one strategy with another.      

February saw some of the biggest of these funds produce mixed returns so far this year, with Millennium Management down 1.3% in February taking their returns on the year so far to a negative 0.8%, said sources with knowledge of the matter. Bloomberg first reported the results.

D.E. Shaw's Oculus Fund returned a negative 4.3% taking their year to a negative 2.8% so far, a source said. D.E. Shaw declined to comment.

Macro funds fared better. Hedge fund Rokos Capital Management's return on investment was down 0.29% during February to the February 21 but was up 0.57% for 2025 so far, said the source.

Rokos declined to comment.

British financier Andrew Law's secretive macro fund Caxton returned 4% in February adding gains to a positive year so far, up 7%, said another source with knowledge of the matter on Friday. Caxton did not immediately respond to several requests for comment.

Hedge fund

February YTD so

far

Millennium Management -1.3% -0.8%

D.E. Shaw Oculus Fund -4.3% -2.8%

Rokos Capital Management -0.29% 0.57%

Caxton 4% 7%

CFM Discus 3.92% 7.87%

CFM Stratus 1.83% 4.45%

AQR Apex 2.8% 5.4%

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Louise Heavens)