A hedge fund managed by Hong Kong-based Jupiter Research Capital lost more than 40% of its value in July, highlighting the severe impact that the global sell-off in AI-related stocks has had on quantitative investment strategies, according to a sport by Bloomberg.
The report cites investor communications as showing that the Jupiter Tactical Trading Fund saw losses deepen rapidly during the month, falling from less than 7.5% in the opening days of July to around 43% by July 24. The fund managed approximately $186m earlier this year.
The sharp drawdown comes despite the fund’s strong start to 2026. The market-neutral strategy, which aims to generate returns regardless of broader market direction, had reportedly gained around 60% after fees during the first five months of the year.
Although the fund’s portfolio has not been disclosed, the losses coincide with a broad decline in AI-related and small-cap stocks that have been widely favoured by quantitative managers in China. Many systematic funds have relied on momentum strategies in these names, making them particularly vulnerable as sentiment reversed.
Chinese small-cap benchmarks were among the hardest hit during the sell-off, with the CSI 1000 and CSI 2000 indices both declining by more than 20% during July, substantially underperforming the broader CSI 300 Index.
The Jupiter fund is understood to employ leverage of between two and four times, which would have amplified both gains earlier in the year and losses as markets turned lower.
The sell-off has exposed the risks of crowded AI trades across the global hedge fund industry. Concerns over whether the largest technology companies can sustain current levels of artificial intelligence investment triggered widespread declines throughout the AI supply chain, affecting equities across the US, China and South Korea.
Quantitative managers have been particularly affected as momentum-driven models rapidly reversed, forcing many funds to unwind positions in AI and smaller-cap stocks. Goldman Sachs recently described the sharp reversal in China’s equity market as a “quant quake”, with declining prices triggering further selling pressure through margin liquidations.
The turmoil has extended beyond China. AI-focused hedge fund Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, has also been forced to dramatically reduce its public equity exposure after suffering heavy losses during the sector-wide correction.
Despite the difficult month, some AI-related equities showed signs of stabilising at the end of the week, with technology-heavy benchmarks in China and South Korea rebounding as investors cautiously returned to the sector.
Jupiter Research Capital has close links to Shanghai-based quant manager Minghong Investment, one of China’s largest systematic investment firms. Minghong’s domestic market-neutral strategy has remained profitable this year, gaining around 4% through July 24, outperforming many of its Chinese quantitative peers, whose returns have broadly turned negative during the recent market volatility.
