Hedge funds' 2026 gains dented by tech trades in July, JPMorgan says

• Asia-Pacific stock pickers suffered the most with negative 9.4% returns in July, while multi-strategy funds lost 2.2% and quantitative equity funds dropped 5%
• JPMorgan identified quantitative hedge funds as the most leveraged strategy at 450%, with overall hedge fund leverage remaining near five-year highs despite being below the 12-month peak
• July 'de-grossing' (dumping unprofitable trades) was the most pronounced since 2020 and 2022, continuing a pattern of hedge funds selling U.S. stocks in July and re-buying in September since 2018

Market Summary: Hedge Funds Hit by Tech Trade Unwinding in July 2026

Key Performance Metrics

Global hedge funds surrendered nearly 3% of gains in July but remain up approximately 8% year-to-date across all strategies, according to JPMorgan analysis. Multi-strategy funds posted -2.2% returns for the month, while Asia-Pacific stock pickers suffered the worst performance at -9.4%. Global quantitative equity hedge funds averaged -5% losses.

Market Drivers

The selloff was triggered by ongoing Iran war tensions that caused crude oil price spikes, leading to a broader market downturn. U.S. tech stocks fell more than 7% during July, with losses stemming from crowded technology positions that prevented profitable exits when markets deteriorated.

Strategic Insights

JPMorgan identified momentum trades—betting on past winners continuing to outperform—as the primary culprit behind July losses. Quant hedge funds remain the most leveraged strategy at 450% assumed leverage. Overall hedge fund leverage stayed at July's starting levels but experienced significant intramonth volatility, remaining near five-year highs though below 12-month peaks.

Market Patterns

A recurring pattern has emerged since 2018 of hedge funds dumping unprofitable U.S. stock positions in July and re-buying in September. This year's "de-grossing" was the most pronounced since 2020 and 2022.

Goldman Sachs corroborated the severity, reporting global stock pickers experienced their second-worst monthly losses in four years, while Asia-based stock pickers posted their worst month ever recorded by the bank.

Implications

Despite July's setback, hedge funds maintain relatively high positioning in tech stocks with larger trade sizes, suggesting continued conviction in the sector despite recent volatility.