A sharp global equity sell-off triggered by the Trump administration’s latest tariff announcement has dealt a heavy blow to equity long-short hedge funds, wiping out their gains for the year in a single session, according to a report by Reuters.
According to a note from Goldman Sachs, equity long-short funds fell 1.7% on Thursday, bringing their year-to-date performance to -1.6%. The losses reflect the sharp market drawdown, as investors reacted to sweeping new tariffs that stoked fears of a global economic slowdown.
The S&P 500 closed the day down 4.2%, while the tech-heavy Nasdaq dropped 5.3%, as risk assets sold off broadly and investors sought refuge in safe-haven trades.
The sharp reversal marks the second significant drawdown for long/short equity managers this month, following a 1.5% intraday drop on March 10, when rising macro uncertainty led many funds to unwind concentrated stock positions amid growing recession concerns.
Goldman Sachs noted that hedge funds had already been positioning more defensively, with bearish sentiment reaching a five-year high earlier this month. Despite this, leverage across long/short strategies remained elevated—near peak levels seen in the past half-decade—leaving funds particularly vulnerable to sharp equity moves.
The setback underscores the increasingly challenging environment for equity-focused hedge funds attempting to navigate volatile macro signals, geopolitical risk, and erratic policy shifts. While many managers had pivoted toward risk mitigation, the velocity and breadth of Thursday’s sell-off left few strategies unscathed.
The tariff escalation not only rattled markets, but also revived concerns that long-short managers – already facing performance pressure and fee compression – may continue to struggle to deliver alpha in a landscape driven more by political unpredictability than fundamental analysis.
