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Matthias Knab, Opalesque for New Managers:

Hedge funds lost ground in October as a sharp sell-off in technology and AI-related equities hit Equity Hedge and growth exposures. Gains in Activist and fixed income strategies only partly offset the losses. The HFRI Fund Weighted Composite Index fell an estimated -1.4% for the month, according to HFR, cutting its year-to-date gain to +5.4%. The HFRI Asset Weighted Composite Index declined -1.0% and is up +6.4% for 2026.

Throughout the month, managers positioned for major US policy changes ahead of the midterm elections, which handed control of Congress to the Democrats. "Hedge funds were positioned for rapid policy shifts heading into the midterms, and the result guarantees that volatility will remain elevated over the intermediate term," said Kenneth J. Heinz, President of HFR. He pointed to AI regulation, data centers, tariffs, taxes, interest rates and the Iran conflict as the factors likely to drive markets, and said the resulting instability should create significant opportunities for active management.

The AI sell-off continued after the vote

The pressure on AI stocks did not end with October. Markets first rallied on Wednesday, November 4, as the election result removed a layer of uncertainty. The relief did not last. On Thursday, chip and data center stocks led a broad sell-off on fears that a Democratic Congress, along w......................

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