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Hedge funds plunge in July as AI selloff triggers margin calls
Situational Awareness dropped 67% in July after selling most of its public equities book to meet margin calls, while PivotalPath data showed a 10% drop in its technology, media and telecom hedge fund benchmark.
Hedge funds reported steep losses in July as AI-related stocks tumbled, with margin pressure forcing some managers to unwind positions quickly, according to LiveMint Markets, citing research and reporting summarized from Bloomberg.
The highly leveraged Situational Awareness fell 67% last month and sold most of its public equities portfolio at a deep discount to Citadel founder Ken Griffin, with the fund offloading shares to meet margin calls. The selloff also reflected investor concerns about whether large corporate spending on AI is sustainable.
PivotalPath said the month marked a reversal of trades that had worked well earlier, noting its index for hedge funds trading technology, media and telecom stocks fell 10% in July, the worst among its benchmarks. PivotalPath founder Jon Caplis said the same kinds of trends had been compounding at roughly 25% annually over the prior three years until June.
Specific hedge fund results varied, with Whale Rock Capital’s flagship tech-focused fund down 21.7%, Altimeter’s AI-focused fund down 11%, and Tiger Global’s tech-focused long/short strategy down 4.8%. Tiger’s crossover fund fell 2.7% but remained up 18.9% for the year, while Viking Global, described as having little AI exposure, lost 0.2% in July and is up 2.5% for the year.