Goldman prime desk: more than two-thirds of hedge funds fell Oct. 22

All three of the broad equity strategies that Goldman Sachs' prime brokerage tracks fell more than 1% on Oct. 22, the first time that has happened on the same day since the Covid-19 pandemic, the desk told clients. HedgeCo News reported the desk's account on Oct. 23.

Goldman estimated that more than two-thirds of the hedge funds in its prime book finished the day lower, with concentrated short positions squeezed further in the second half of the session. Global fundamental long/short managers lost 1.4%, their worst session since July 16, and telecom, media and technology specialists fell an average of 2.7%. Systematic long/short managers slipped 1.3%, their third-worst day since December 2023. Multi-strategy platforms, which are built to keep firm-wide drawdowns contained, slid 1.9%, their second-worst day since the April 2025 tariff selloff. "If last Thursday felt bad, today has been worse," the desk wrote, according to Reuters.

For fund selectors, the session works as an overlap test. Losses that hit fundamental, quantitative and multi-manager books at once point to shared crowding in the same AI-linked names rather than isolated stock-picking errors, the report said. Gross exposure, how quickly a manager cuts risk and how much of each book sits in the same AI-linked names are the terms to ask about.

Renewed doubt about the payoff from AI capital spending set off the selling. Meta Platforms fell about 7%, its largest drop since July, after saying it would issue a new class of shares to help raise funds, while Nvidia dropped roughly 4% and the Nasdaq Composite lost 2.6%. Market participants told Reuters the losses forced deleveraging as managers cut exposure to crowded AI trades.

Third-quarter earnings season is still under way and U.S. midterm elections are approaching; the next test is whether managers can rebuild gross exposure without being forced to sell into further weakness, according to the report.