HEDGE FLOW-Hedge funds hit by market sell off, stuck in leverged trades, says Goldman

By Nell Mackenzie

LONDON, March 4 (Reuters) - Global hedge funds were hit by Tuesday's sharp market sell-off, many suffering their worst trading losses since April 2025, when U.S. President Trump's tariff announcement, a Goldman Sachs prime brokerage note shows.

Still, most hedge funds retained an overall positive return for 2026, showed the note, published after Tuesday's market close and seen by Reuters on Wednesday.

World markets came under broad selling pressure on Tuesday on concerns that the war in Iran could disrupt global supply chains, push up energy prices and fuel inflation.

Here are some details from the Goldman note:

• Stockpickers taking long and short positions were down by 1.9% on Tuesday because of their broader market exposure, often described as beta.

• Some losses came from momentum trades on highly crowded names, including technology. Momentum trading strategies buy as the market goes up, even if that market seems overbought.

• Stockpickers are still up 1.7% for the year.

• Asia-based hedge funds had the worst results, down 3.2% Tuesday but are still up 10.8% for 2026 so far.

• Hedge funds that employ systematic stock trading strategies were down 0.5% Tuesday with losses due to momentum strategies and also crowded positions.

• Systematic traders are still up 4.7% for the year so far.

• Multi-strategy funds, which have many different trading desks under one firm name, saw their stock trading portfolios down 1% Tuesday.

• These hedge funds have 4.5 times leverage, or borrowing, on trades, said the note, which can increase gains but also magnify losses.

• Multi-strategy funds, which include some of the biggest hedge funds in the world, are still up 5.2% for the year so far.