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Investing.com -- Quant hedge funds have begun 2026 with losses as setbacks in crowded U.S. stocks hurt their strategies, raising concerns about volatility in the sector.
The first 10 days of January marked the worst period for systematic long-short equity managers since October, with losses reaching 1%, according to prime brokerage data from Goldman Sachs Group Inc. Most losses occurred in U.S. equities, with Goldman analysts Kartik Singhal and Marco Laicini noting similarities to sharp drops that damaged quant portfolios in June and July last year.
U.S. quant funds lost 2.8% in the first two weeks of 2026, based on UBS Group AG’s prime book estimates. UBS reported that Friday saw the sharpest one-day deleveraging since Dec. 22..
Goldman attributes the recent selloff to three main factors: losses in crowded positions, short positions on high-beta names, and adverse idiosyncratic moves.
"The idiosyncratic drag has been driven predominantly by the short book, similar to the June-July drawdown," Singhal and Laicini told clients, adding that momentum strategies helped reduce losses this time.
The poor start coincides with global market volatility. While AI and economic confidence initially drove rotation into riskier shares and small-caps, risk sentiment deteriorated early this week amid President Donald Trump’s push to take control of Greenland and renewed trade-war concerns.
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