Trend-following hedge funds recorded their worst weekly performance in two years as a sharp sell-off in tech stocks and heightened bond market volatility triggered losses across systematic and fundamental strategies, according to a report by Reuters citing Goldman Sachs.

Systematic long/short hedge funds declined 2% last week, their steepest weekly loss since 2024, while fundamental long/short strategies fell 1.1%. The losses came as the Nasdaq 100 dropped 5.5%, its largest weekly decline since April 2025, amid growing concerns over the returns on substantial artificial intelligence investment. Meta shares fell 10% despite strong earnings, after the company indicated it would need to raise additional capital to fund AI spending.

Fundamental long/short strategies are down 3.8% in October but remain up 8.8% year-to-date, while systematic strategies have declined 1.1% this month despite generating returns of 18.7% in 2026. The volatility has prompted hedge funds to reduce leverage and cut equity exposure, with single-stock positions recording their largest reduction in gross exposure since late July.

Goldman's prime brokerage desk reported $20bn in technology stock selling over the past two weeks, approaching the $23bn recorded during July's major unwind. US equities have now been net sold for three consecutive weeks and four of the past five, highlighting the continued retreat from crowded technology positions as managers reassess risk exposure.