Asia Equity Long/Short Hedge Funds Post Record Monthly Loss in July
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Asia long-short equity hedge funds lost an average 18.6% in July through the 28th — a record single-month drawdown, according to a Goldman Sachs prime-brokerage report — as the same concentrated AI-hardware bets that made them global top performers in the first half turned against them.
How bad is the damage?
Through July 28, these funds fell 18.6% on average — the worst single month on record.
Year-to-date gains had peaked at 40% on July 22; within a week, 21 percentage points were erased.
This means → more than half of six months' outperformance vanished in a matter of days, far faster than it was built.
Why did they lose so much?
Goldman was explicit: the concentrated AI positions that drove the first-half rally are now "the primary cause of this month's excess losses."
The heavier a fund's AI exposure, the worse the hit — some of these funds had gained over 100% in the first half.
In plain terms = everyone crowded onto the same trade on the way up; when it reversed, nobody could get out. The more concentrated the book, the harder the whiplash.
Which markets took the hardest hit?
Asian semiconductor stocks fell sharply this week, with South Korea leading the decline.
The KOSPI plunged nearly 11% on Tuesday — its worst single-day drop in roughly five months.
SK Hynix and Samsung Electronics were both heavily held by these funds. This means → the selling pressure came not from deteriorating fundamentals but from forced unwinds — a classic crowded-exit stampede.
How are funds responding?
Through July 27, Asian hedge funds had been cutting positions for eight consecutive trading days.
Goldman data show that the five-day cumulative deleveraging — the pace at which funds shed borrowed exposure — hit an all-time record, with selling concentrated in Taiwan, South Korea, Japan, and China.
Vikas Pershad, Asia equity portfolio manager at M&G Investments, said: "In terms of market-cap impact, this is the largest position unwind we have ever seen."
What to watch next?
Pershad noted that the heavy trading volume that amplified gains on the way up is now accelerating the decline.
This reflects a textbook leverage feedback loop: buying on margin pushed prices higher; forced selling now pushes them lower — the momentum simply reversed direction.
When deleveraging ends will be the key variable in determining whether Asian tech stocks can stabilize.
Content is for reference only, not financial advice.