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Tech hedge funds see July losses, raising volatility risk for the trade
Pivotal Path data cited by JPMorgan show technology, media and telecom hedge funds fell more than 10% in July, while the Philadelphia Semiconductor Index dropped 21% for the month.
JPMorgan Chase & Co. said the technology trade could become more dependent on retail investors and more volatile after a sharp July selloff, based on preliminary data on technology, media and telecommunications equity sector hedge funds.
According to JPMorgan strategists, data from Pivotal Path indicated that such hedge funds lost more than 10% in July, excluding Situational Awareness, which was forced to sell most of its public stock portfolio after the semiconductor and technology rout.
JPMorgan pointed to the broader retreat in high-flying semiconductor and memory names, saying the Philadelphia Semiconductor Index shed 21% in July, its worst month since 2008, as investors rotated out of top AI performers amid concerns about heavy spending.
The bank added that the July decline could prompt hedge funds to tighten risk management and concentration limits, and that prime brokers may reduce balance-sheet capacity for these strategies, which could structurally limit institutions' ability to hold volatile tech exposure and amplify swings tied to leveraged ETFs, retail option buying, and retail margin accounts.