Hedge funds suffered widespread losses in October as crowded technology positions, geopolitical shocks and credit market volatility triggered simultaneous drawdowns across strategies, raising concerns over leverage and the effectiveness of portfolio diversification, according to a report by Bloomberg.

Among major multistrategy managers, Balyasny Asset Management declined 3.4% during the month, leaving it down 2.7% for the year, while ExodusPoint Capital Management lost 2.4%, reducing its year-to-date gain to 1.6%. Millennium Management fell 2.3%, bringing its annual return to 5.7%, and is withdrawing more than $1.5bn from external managers Troluce Capital Advisors and Axebrook Capital following losses at both firms.

The downturn also affected specialist managers. Walleye Capital is returning part of its investors' capital after recording its worst monthly performance since March 2020, while Greg Coffey's Kirkoswald Asset Management suffered its largest monthly loss on record. Credit hedge fund Arini Capital Management declined more than 12%, while AI-focused Value Aligned Research Advisors plunged 33%.

Equity-focused managers were similarly affected, with D1 Capital Partners' stock portfolio falling 4.4% and Whale Rock Capital Management's flagship fund declining approximately 8%. The losses reflected a broader retreat from AI-related investments, compounded by political turmoil in Brazil and France and renewed concerns over credit market risks.

However, several major managers delivered positive returns. Citadel's Wellington fund gained 1.7% in October, lifting its year-to-date return to 15.3%, while DE Shaw's Composite fund advanced 0.7%, bringing its annual gain to 16%. Quantedge was a standout performer, returning 7.2% during the month and 60% for the year.

The market turmoil intensified in early November, with the Nasdaq 100 falling 6.4% on Thursday, its sharpest decline since March 2020, and the S&P 500 dropping 4.4%. The reversal followed a brief post-election rally as investors reassessed the outlook for AI investment and potential regulatory intervention.

The breadth of the losses has heightened concerns over correlations between supposedly diversified hedge fund strategies, particularly among multimanagers employing leveraged trading teams. Market participants warn that further risk reductions and forced liquidations could spread selling pressure beyond crowded technology positions into otherwise fundamentally sound investments.