Asia-Based Hedge Funds Face Record 18.6% Losses in July

Asia’s hottest hedge funds just learned a painful lesson about momentum: it works both ways. Goldman Sachs reports that Asia-focused long/short equity hedge funds suffered an average loss of 18.6% through July 28, marking the single worst month on record for the strategy.

The carnage was concentrated in AI and semiconductor stocks, the same trades that had propelled these funds to eye-watering returns earlier in 2026. Peak year-to-date gains hit 40% on July 22. By the end of the following week, 21 percentage points of that had evaporated.

Earlier this year, Asia-based hedge funds loading up on semiconductor and AI hardware names were the envy of the industry. Some posted triple-digit returns in the first half of 2026, riding a wave of enthusiasm around artificial intelligence infrastructure buildout across the region.

The WT China Fund was a poster child. It surged 120% in the first six months of the year. Then it dropped 17% between July 1 and July 17. Keystone Investors’ fund followed a similar arc, climbing 63% through the first half before giving back 12% in the July reversal.

The losses were primarily tied to long positions in AI hardware leaders like SK Hynix and Samsung Electronics. Both stocks had been consensus overweights among Asia-focused funds, which meant when the selling started, everyone was heading for the same exit.

Goldman’s data shows Asian hedge funds reduced their exposure for eight consecutive trading days through July 27, with cumulative position cuts reaching record levels.

Goldman’s analysis noted that interest in value investing within the crypto sector appeared to gain traction amid the equity selloff.

The eight consecutive days of de-risking suggest the worst of the forced selling may be subsiding. But with YTD gains cut roughly in half for the average fund, investors with exposure to Asia tech should be watching fund flow data closely for signs of whether the deleveraging has truly run its course.