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Tech selloff wipes out hedge fund gains, prompting risk cuts and layoffs
A sharp global equity selloff led by technology shares erased much of many hedge funds’ gains for 2026, with tech-focused funds hit hardest. The losses have prompted managers to reduce risk and shrink some investment teams, and further cuts could follow if markets continue to fall.
Goldman Sachs estimated that technology-focused equity long-short funds lost more than 4 per cent on Thursday, leaving their year-to-date returns roughly flat after gains peaked at 24 per cent in June. Walleye Capital, a $17 billion fund, said it would scale back its internal equity long-short business, cut a substantial part of its equity team and return some capital after its worst month since March 2020; JPMorgan estimates hedge funds lost 3 per cent in October.
In short
- A tech-led selloff wiped out many hedge funds’ 2026 gains.
- Tech-focused long-short funds fell more than 4 per cent on Thursday.
- Walleye Capital plans team cuts and to return some capital.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Managers can argue that cutting risk and reducing teams is a responsible response to sharp losses and continued market uncertainty. Protecting investors’ capital and keeping the business financially resilient may require narrowing strategies that have performed poorly, even when that means difficult staffing decisions.
The case against
Investors and staff can argue that rapid cuts after a severe but potentially temporary selloff risk locking in losses and weakening teams needed to manage a recovery. They may also question whether strategies that delivered substantial gains earlier in the year are being judged too heavily on a short period of volatility.
Explained simply
Hedge funds pool money from investors and use a range of strategies to try to make returns. Equity long-short funds buy shares they expect to rise and bet against shares they expect to fall, often focusing on particular sectors such as technology.
Technology shares can move sharply as expectations about company growth and profits change. When prices fall, funds that have built up large positions in the sector can lose gains quickly, leading managers to reduce investments or staffing.
Walleye Capital is one fund affected, while Goldman Sachs and JPMorgan have estimated losses across the sector. The figures matter because they show how a broad market downturn can affect investors and the businesses that manage their money.