US Stocks Plunge: Hedge Funds Slash Staff Overnight

Markets Plunge as Tech Stocks Lead Steep Sell-Off

The first week of November 2026 will be etched in the annals of the U.S. capital markets. Following historic breakthroughs for Democrats in key states during the midterm elections, the following day saw the most brutal single-day decline in the U.S. stock market since March 2020.

The S&P 500 index fell 4.36%, wiping out approximately $2.9 trillion in market capitalization in a single day. The Nasdaq Composite index dropped 5.52%, marking an 11% retreat from its October all-time high and entering technical correction territory. The Nasdaq 100 index plunged 6.4%, its largest single-day drop since March 2020, erasing about $2.3 trillion in market value. The Philadelphia Semiconductor Index plummeted 12%, the steepest decline since 2020, while the Dow Jones Industrial Average lost 3.44%.

However, the market’s downturn did not begin on November 5th. Selling pressure had been building since October, fueled by subdued expectations for Republican gains in the midterm elections.

Hedge Funds Face Widespread Losses

Data from Goldman Sachs revealed that short-selling bets on individual stocks in October reached a nearly five-year high. Morgan Stanley data indicated that equity-focused funds executed their largest active reductions in over a decade during October, with net market exposure falling by approximately 9% since June. By the end of October, over 40% of funds had seen their year-to-date returns flatline or turn negative.

Global hedge funds experienced an average loss of about 3% in October. While this figure may seem modest, it masks significant pain. Upon closer examination, large multi-strategy and equity-picking funds were almost universally affected.

Among the few exceptions reporting positive returns was Citadel’s Wellington fund, which surged 1.7% in October and 15.3% year-to-date. The vast majority, however, posted losses: LMR (-0.8%), Dymon Asia (-1.8%), Man Group’s 1783 fund (-1.8%), Point72 (-2.0%), Millennium (-2.3%), North Rock (-2.3%), ExodusPoint (-2.4%), Verition (-2.5%), Schonfeld (-2.7%), Balyasny (-3.4%), Pinpoint (-4.5%), Marshall Wace’s Eureka strategy (-5.4%), Engineers Gate (-5.5%), and Walleye (-5.9%).

In more extreme cases, Lone Pine saw a monthly decline of 8.8% in October. Arini, a credit bond fund, had fallen 12.1% as of October 23rd, marking its worst monthly performance since its inception.

Funds like Millennium, Point72, Schonfeld, Balyasny, ExodusPoint, Verition, Pinpoint, North Rock, Dymon, Man Group, and LMR, typically associated with “stability, low volatility, and double-digit annualized returns,” found themselves in negative territory in October.

The Impact of October’s Sell-Off

The severity of October’s losses can be illustrated by considering a multi-strategy fund managing tens of billions of dollars, with a long-term annualized target of 10%-15%. A normal monthly fluctuation for such a fund would be around ±1%-2%. October’s downturn, however, saw losses ranging from 2% to 6%, representing two to four times the normal monthly volatility.

For a fund like Walleye, with approximately $17 billion in assets under management, a 5.9% loss translates to roughly $1 billion in erased value in a single month.

A more direct comparison involves juxtaposing October’s losses with the gains accumulated in the first nine months of the year:

• Citadel Wellington: +1.7% in October, +15.3% year-to-date. October’s gain represented 13% of its year-to-date earnings, with minimal impact on its annual performance.
• Millennium: -2.3% in October, +5.7% year-to-date. The October loss erased 28% of its accumulated gains from the first nine months.
• Point72: -2.0% in October, +8.6% year-to-date. The October decline wiped out 19% of its year-to-date earnings.
• Marshall Wace Eureka: -5.4% in October, +5.3% year-to-date. The October loss accounted for 48% of its year-to-date gains.
• Walleye: -5.9% in October, -6.8% year-to-date. The single month’s loss pushed its annual performance into negative territory.
• Balyasny: -3.4% in October, -2.7% year-to-date. The fund, which was positive through the first nine months, turned negative after the October downturn.

Furthermore, the Situational Awareness fund experienced a catastrophic 70% loss in July, leading to a complete liquidation before October even began.

Repercussions and Restructuring

Financial losses inevitably trigger a chain reaction within the fund industry, often leading to the dismantling of entire strategy lines and the return of capital to investors.

Anil Gondi, head of equities long/short, and a “significant portion” of his internal long/short team were reportedly laid off. Gondi, who joined in July 2025, was previously a long-term equity portfolio manager at Balyasny Asset Management and founded 6elm Capital.

In a letter to investors, CEO and Chief Investment Officer Will England acknowledged that investments made over the past few years to improve the internal equity business, including the hiring of new executives, “had not yielded the expected results,” with opportunity costs and resource consumption outweighing returns. The firm also announced plans to return a portion of capital to investors.

Engineers Gate, after losing 5.5% in October, laid off most of its equity team, known as Synthesis, including its head, retaining only five fundamental managers. In a client letter, the firm stated that the team’s performance was insufficient to continue in its current form following the sharp reversal in AI and technology stocks. The company also reduced capital or terminated partnerships with a few other portfolios.

Samlyn, managing approximately $7 billion in assets, divested holdings across almost all sectors except financials, laid off several senior analysts, and shifted its focus exclusively to the global financial sector.