Fundamental long-short equity hedge funds were hit hard last week, with Goldman Sachs reporting a 4.7% decline over Thursday and Friday alone — marking one of the sharpest two-day drawdowns for the strategy in recent years, according to a report by Bloomberg.
The sell-off followed the Trump administration’s unexpected announcement of sweeping new tariffs, which triggered a global equity rout and widespread portfolio de-risking.
According to a note from Goldman’s prime brokerage unit, Thursday marked the largest single day of net selling across global equities the firm has recorded, with short positions accounting for the bulk of the divestment activity.
US equities bore the brunt of the liquidation, comprising 75% of global net selling on Thursday. Asia also saw heavy pressure, with Goldman noting the third-largest day of selling in regional stocks since it began tracking flows. Japanese equities were at the centre of the storm, accounting for 70% of the week’s Asia-related divestments.
Asia-focused fundamental long-short managers were down 2.4% across Thursday and Friday, paring year-to-date gains to 2.8%. In Japan, the recent losses have erased all performance gains for the year. Goldman’s note also highlighted that managers in the region were more active in building new short positions than unwinding existing longs, signalling a shift toward a more bearish outlook.
The broader market backdrop was equally severe. The MSCI World Index tumbled 9.3% over the two-day stretch — the worst performance since March 2020 at the height of the Covid-driven panic. Asian markets continued their slide into Monday, while China and other regional exchanges were closed for holidays on Friday.
