Hedge Funds Fell an Average 3% in October, With Marshall Wace's Eureka Down 5.4%

Since the Nasdaq 100 entered correction territory after falling 10% from its Oct. 6 peak, the question has been who got hurt. October performance figures from the hedge fund industry now offer an answer: a lot of them, and across nearly every strategy.

Global hedge funds declined an average of 3% in October, according to data from PivotalPath. Bloomberg described it as one of the broadest declines since the coronavirus pandemic. The causes were a technology sell-off, a government bond rout and Brazil's shock election.

Funds hit across strategies

Marshall Wace, the $80 billion London manager, took losses in two flagship funds. Its Eureka strategy lost 5.4% in October, cutting its year-to-date gain to 5.3%. Its systematic Tops strategy fell 3.6%, leaving it up 1.3% for the year, according to the Financial Times.

Other managers fared better, though still in the red, Bloomberg reported:

• ExodusPoint Capital Management: down 2.4%
• North Rock, an equity-focused fund: down 2.3%
• Dymon Multistrategy: down 1.8%

Credit took the worst of it. Bloomberg reported that Arini was down 12.1% through Oct. 23 and on track for its worst monthly loss ever. A final October figure for the fund has not surfaced.

Graham Capital Management's discretionary macro strategy fell 1.8%, trimming its 2026 return to 1.2%. Its quantitative macro strategy posted only a marginal monthly loss and is still up 21.6% for the year.

The bond side of the damage

Equities were only part of it. Rising oil prices and political uncertainty in France pushed French and Italian government bonds lower relative to German Bunds. The widening spreads disrupted the relative-value and arbitrage trades that macro and fixed-income funds depend on.

Stock pickers were already bleeding by mid-month. Goldman Sachs said global fundamental long-short funds lost 2.9% through Oct. 15, and Asia-focused stock pickers lost 6.8%. Even so, the global group remained up 14.3% for the year.

Goldman said all three major strategies, stock pickers, systematic long-short funds and multi-strategy funds, lost more than 0.8% on Feb. 4, July 28 and Oct. 15 this year. From the pandemic through the end of 2025, the bank recorded no session when the three strategies suffered declines of that size together.

South Korea's KOSPI fell 8% that Thursday to a six-month low. Taiwan stocks lost more than 3%.

Goldman tied the retreat partly to hotter-than-expected U.S. inflation data, which raised expectations of further interest rate hikes. Investors were also questioning whether AI infrastructure spending would pay off fast enough to justify the cost.

What drove the selling

The month's last two sessions were violent. On Thursday, Alphabet's Class A shares fell 12.64% after its quarterly report, erasing about $475 billion in market value, according to Yahoo Finance. The company reported third-quarter revenue up 25% to $127.6 billion, and Google Cloud revenue of $30.7 billion, up 103%.

On Friday, the Nasdaq 100 fell 3.47% to 28,384.85. The S&P 500 fell 1.82% to 7,580.07, and the Philadelphia Semiconductor Index dropped about 7.2%. Intel fell 28.58% in a single session, to $65.76, its worst single-day decline since 1974.

The IMF warned on Oct. 13 that an AI market correction could carry global consequences. BlackRock's research arm cut its U.S. stock outlook to neutral, citing possible volatility around AI infrastructure spending.

Former portfolio manager Jordi Visser reads the month differently. He argues it was a positioning unwind inside a bull market, not a bubble bursting. In his telling, the S&P 500 fell just 93 basis points in October, nine of 11 sectors finished higher and 327 of 500 stocks rose at least 2%.

Visser points to leverage as the culprit. Morgan Stanley's prime brokerage logged its largest October degrossing in more than ten years, he said. Goldman data showed hedge fund net exposure at its lowest outside the April 2025 tariff shock in five years, with all net buying since 2025 reversed. That amounted to roughly $20 billion of tech stock sales in two weeks, according to Reuters reporting on Goldman's notes. Charlie McElligott counted 124 pair trades in the unwind, 47 of which moved more than three sigma.

Visser also dismisses the bubble thesis because compute rental prices are still climbing. The IMF's warning, and the sheer size of the Nasdaq 100's losses, point the other way.

Visser's own outlook is not comfortable. He flagged CCC-rated debt yields near 16%, a level he says has been hit only twice before, and predicted bankruptcies.

The open question is whether the deleveraging is finished. If funds that cut risk in October stay cut in November, the pressure on crowded tech positions eases. If CCC credit keeps cracking, as Visser warns, the damage moves from stock pickers to borrowers.