Tech Rout Hands HFs Second Straight Monthly Loss

Hedge funds lost 1.4% in October as technology and growth strategies led a second straight monthly decline for equity hedge managers, according to HFR. About 60% of funds in the HFRI Fund Weighted Composite Index posted losses, and the gap between the strongest and weakest performers widened from September.

The composite’s decline followed a 0.7% loss in September. The HFRI Equity Hedge Index fell 2.4% in October, led by a 5.6% drop in fundamental growth strategies and a 4.8% decline in technology strategies. The technology index had gained 2.1% in September, cushioning losses elsewhere in equity hedge that month.

Macro strategies also reversed course. The HFRI Macro Index fell 1% after gaining 2.7% in September. Discretionary thematic strategies lost 3.2%, commodity strategies fell 1.9% and systematic diversified strategies slipped 0.1%. Activist and fixed-income managers fared better in the weeks before the U.S. midterm elections.

The October losses reshuffled the year-to-date rankings. The HFRI Yield Alternatives Index took the lead among HFRI subindexes with a 15.56% gain through October, overtaking the technology index, which had led through September with a 16.76% return.

HFR President Kenneth Heinz said uncertainty over AI regulation, data center development, tariffs and interest rates could keep volatility elevated after the midterms.

The composite masked sharply different results for investors. The top 10% of funds gained an average of 7.7% in October, while the bottom 10% lost 13.2%. The 20.9-point gap widened from 14.6 points in September. Over the 12 months through October, the top group gained 43.8% and the bottom group lost 17.4%, a gap of 61.2 percentage points.

The pressure may not be over. Tech stocks plunged again on Nov. 5, when the Nasdaq had its worst day since April 2025.