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Matthias Knab, Opalesque for New Managers:

For six months, 2026 gave hedge funds one of their cleanest runs in more than a decade. July ended it. The PivotalPath Hedge Fund Composite Index fell 0.8% for the month, trimming the industry's year-to-date gain to 6.4% - still one of the strongest stretches the industry has logged in years, but the first real signal that near-uninterrupted gains had been hiding a fragility underneath.

According to PivotalPath's August "Pivotal Point of View," which tracks more than 3,000 institutionally relevant funds spanning over $3 trillion in assets, the month came down to a single question: how exposed were funds to the AI trade that has carried the year. The answer separated winners from losers more cleanly than any directional call.

Equity at the epicenter

Equity strategies bore the brunt. The PivotalPath Equity Sector Index fell 4.3% in July - its worst month since March 2025 - even while holding an 11.4% gain for the year. The damage concentrated in the Technology/Media/Telecom sleeve that had defined the rally: the Equity Sector: TMT Index dropped 7.4%, its worst month since September 2008, arriving just one month after it posted the best first half in its history.

The reversal was less a collapse in conviction than an unwind of crowding, PivotalPath argues. Megacap technology largely held up - the FAANG fact......................

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