Overview
Goldman Sachs reported in a note dated Wednesday that systematic managers - commonly referred to as quant funds because they rely on algorithms to trade market trends - have given back roughly one quarter of their year-to-date returns amid recent market turbulence. As of the latest update in that note, returns for this group stand at 10.8% for the year, down from 14.4% on June 22.
Where losses came from
The bank said the declines were driven by positions against some of the most crowded areas of the market: U.S. equities, Asian developed-market stocks and, to a lesser extent, European equities. The trading backdrop was further complicated by large swings in shares of semiconductor companies in late June and into early July. Goldman highlighted that elevated levels of retail investor leverage, particularly in Korean markets, intensified many of those price moves.
Scale and market makeup
Quant strategies accounted for roughly 10% of the largest hedge funds in 2025, according to S&P Global data cited in the note. Regulators - including officials at the Bank of England, the Bank of Japan and the Bank for International Settlements - have repeatedly warned about stretched valuations, especially in the technology sector. Goldman pointed out that shares of companies such as Micron Technology, Intel and Marvell Technology have climbed by about 200% in 2026.
Performance among other hedge fund groups
Goldman said fundamental managers, or stockpicking funds, were down 2.2% over the same recent stretch, reflecting their exposure to crowded technology-sector trades. Despite that shorter-term decline, fundamental managers remain up 15.5% for the year. The bank also noted that these stockpickers have "aggressively" exited AI-related trades that had previously been sources of strong gains.
Leverage and risk posture
The mass unwinding of AI-related positions has pushed overall hedge fund leverage to its lowest level in the past year, a gauge of how extensively funds had been positioning themselves. Goldman framed this reduction in leverage as indicative of the scale and rapidity of the recent repositioning across strategies.
Market markers cited
The note included specific moves in semiconductor-related names, listing intraday percentage changes for several chipmakers: INTC +4.69%, MRVL +6.67%, MU +8.54%.
This report synthesizes the observations and figures contained in the Goldman Sachs note dated Wednesday. It reflects the bank's assessment of recent returns, the sectors where losses were concentrated, and the broader effects on hedge fund leverage and positioning.