Hedge funds face worst monthly drawdown in over four years, Goldman Sachs tells clients

• Asia-focused long/short funds declined 7.3% in March, European funds fell 6.3%, and U.S. funds dropped 4.3%, with Technology, Media, and Telecommunications (TMT) sector funds down 7.8% for the month
• Hedge funds sold global equities for a fourth consecutive month at the fastest pace in 13 years, while gross leverage levels reached near-record highs at 312.5 (more than three times their books)
• Major multi-manager funds underperformed, with Balyasny Asset Management down 4.3% in March and ExodusPoint declining 4.5%, while systematic trading strategies bucked the trend by posting 1.07% gains

Hedge Funds Post Worst Monthly Losses Since January 2022

Global hedge funds suffered their worst monthly drawdowns since January 2022 in March 2026, according to a Goldman Sachs client note. The decline was driven by market volatility stemming from geopolitical tensions and broader market weakness, with the S&P 500 falling 4.63% and Nasdaq 100 declining 4.87% during Q1.

Regional Performance

Fundamental long/short equity funds experienced negative returns across all regions. Asia-focused funds led losses at -7.3%, followed by European funds at -6.3% and U.S. funds at -4.3% for March. Year-to-date through March 31, Asia funds were up 6.5%, while European and U.S. funds were down 1.8% and 2.4%, respectively.

Sector Impact

Technology, media, and telecommunications (TMT) funds were hardest hit, declining 7.8% in March and 11.8% for the quarter. Healthcare-focused funds dropped 0.9% in March. The equally weighted average long/short returns fell 3.96%, with median returns down 4.77%, indicating larger multi-manager funds underperformed.

Notable Fund Performance

Major multi-strategy funds faced significant drawdowns. Balyasny Asset Management declined 4.3% in March and 3.8% for the quarter, while ExodusPoint fell 4.5% in March and 2% for Q1. In Asia, Dymon Asia's multi-strategy fund dropped 4.3% monthly but posted 6% quarterly gains.

Market Dynamics

Systematic trading strategies bucked the trend, rising 1.07% in March. Hedge funds sold global equities for the fourth consecutive month at the fastest pace in 13 years. Gross leverage reached near-record levels at 312.5 times books. North America saw the largest net selling since April 2020, with short positions outpacing long buys.