Hedge Funds Post Worst S&P 500 Lag in 20+ Years as AI Trades Unwind

1 articles · Updated · CNBC · Aug 21

Goldman Sachs said its basket of hedge funds’ most popular long positions logged the worst one-month underperformance versus the S&P 500 in more than 20 years during July.
July also brought one of the sharpest hedge-fund de-grossing episodes of the past decade as funds cut AI-linked holdings, including many semiconductor names and most mega-cap stocks.
The reversal followed a second quarter when funds were effectively all-in on AI, with portfolio turnover at its highest since 2021 and tech making up 14 of the 20 biggest increases in hedge-fund popularity.
Gross leverage, net leverage and AI exposure have all fallen from Q2 peaks but remain above long-term averages, while U.S. equity long-short hedge funds were still up 10% through mid-August.