P&L and Losses from the Same Source! Nasdaq Stock Market Crash, Hedge Funds Suffer Massive Losses and Shut Down

The original author: Dong Jing

Original source: Wallstreetcn

Overnight, US stocks fell across the board, with the Nasdaq plunging over 5% and the semiconductor index diving 12%. A fresh round of sharp selloffs in tech stocks is now triggering knock-on shocks across the hedge fund industry.

According to a November 6 report by Business Insider, Walleye Capital, a multi-strategy hedge fund with $17 billion in assets, has announced the closure of its core equity long-short team, the return of capital to some investors, and a restructuring of its overall business architecture — marking yet another systemic shock to Wall Street's hedge fund industry from concentrated AI holdings, following the severe blow to AI-focused fund Situational Awareness in July.

In a letter to clients, Walleye Capital disclosed that the fund lost 5.9% in October, its worst monthly performance since March 2020, bringing its cumulative loss for 2026 through the end of October to 6.8%. The fund announced the dismissal of Anil Gondi, head of equity long-short, along with a substantial portion of the internal long-short investment team, and will return some capital to investors, with the specific amount and timing not yet determined.

In addition, systematic hedge fund Engineers Gate also announced the closure of most of its "Synthesis" equity team, having lost 5.5% in October through the 23rd. Meanwhile, several leading hedge funds also recorded significant losses, including Millennium, Marshall Wace's Eureka strategy, ExodusPoint and North Rock Capital.

This round of selling is set against the backdrop of a sharp reversal in AI-related tech stocks. According to Goldman Sachs data, hedge fund managers net sold roughly $20 billion in tech stocks over two weeks, erasing the net long AI positions accumulated since the start of 2025 in just five trading sessions; the semiconductor index fell as much as 11% in a single day, also the largest one-day drop since March 2020. This round of liquidation once again exposes how, when leverage meets crowded positioning, a liquidity crisis can erupt suddenly in an extremely short period of time.

AI Holdings Hit, Walleye Suffers Sharp Monthly Loss

Walleye Capital's losses this time are closely tied to its highly concentrated positions in AI-related tech stocks. According to disclosures, as of the end of the second quarter of 2026, the fund held several major positions in the AI sector, including KLA Corporation, Micron Technology, Advanced Micro Devices (AMD) and Applied Materials.

In this round of tech stock selling, the semiconductor index fell as much as 11% in a single day, the largest one-day drop since March 2020. Goldman Sachs data shows that the hedge fund community sold roughly $20 billion in tech stocks in just two weeks and liquidated all net long AI positions accumulated since the start of 2025 within five trading sessions, highlighting the extreme crowding of prior positioning and the rapid unwinding of leverage.

Walleye Chief Executive Officer and Chief Investment Officer Will England acknowledged in the client letter that the internal equity long-short strategy had been the company's weakest business segment since 2023 and had significantly lagged its external long-short business.

"Over the past several years, we invested considerable resources in improving the internal business, including bringing in new leadership, but these efforts failed to produce the expected results, and the opportunity cost and resource consumption were too high relative to the returns."

Large-Scale Cuts and Capital Returns

As part of this restructuring, Walleye dismissed Anil Gondi, head of equity long-short, and cut a substantial portion of the internal long-short investment team. Gondi joined Walleye in July 2025, having previously served for a long time as an equity stock-picking portfolio manager at Balyasny Asset Management and founded his own fund, 6elm Capital. This is already the second major personnel change in Walleye's equity stock-picking unit this year — in September, the unit's chief operating officer, Matt Giannini, left to return to Citadel.

Walleye also announced it will return some capital to investors, but the specific amount, timing and method of operation have not yet been determined, and investors will be informed of the details later.

Notably, England stressed in the letter that this adjustment does not mean abandoning equity investing. After the restructuring, the internal team will report directly to England; the company plans to continue investing through external equity managers and internal high-conviction portfolio managers, while shifting more resources toward volatility trading, quantitative and other business areas where it has a competitive advantage. England said Walleye's volatility business posted its best monthly performance on record in October and is on track for its best annual performance ever in dollar terms.

In addition, Walleye recently hired Anna Dev, who previously handled business development at Millennium, to help identify external investment opportunities.

Engineers Gate Cuts Synthesis Team

According to a client letter obtained by Bloomberg, New York-based systematic hedge fund Engineers Gate announced on Wednesday that it is parting ways with most members of its "Synthesis" equity team, including team head Mike Daylamani.

The client letter disclosed that the Synthesis team accounted for about 14% of Engineers Gate's total market value at the end of October, and five fundamental portfolio managers will remain after the cuts. Engineers Gate Chief Executive Officer Greg Eisner wrote in the letter that the team's performance "did not meet the standard for continuing to operate in its current form."

Bloomberg reported, citing people familiar with the matter, that Engineers Gate lost 5.5% in October through the 23rd. Eisner attributed the losses in the letter to "the sharp reversal in AI and tech stocks, as well as other market shocks, which led to widespread losses across hedge fund strategies, including one of the largest single-day drawdowns since the pandemic."

In addition to cutting the Synthesis team, Engineers Gate also parted ways with or reduced capital for a small number of "low-conviction portfolios" on its platform and is pushing ahead with the internalization of its Asia business.

Industry Chain Reaction: Multiple Funds Hit Hard

Walleye is not alone. According to Bloomberg, Millennium's flagship multi-strategy fund fell 2.3% in October, Marshall Wace's Eureka strategy fell 5.4%, ExodusPoint fell 2.4% and North Rock Capital fell 2.3%. Point72 Asset Management and Schonfeld Strategic Partners also recorded losses in October.

This round of shocks reminds the industry of a scene from July this year: AI-focused fund Situational Awareness lost 67% of its portfolio's value at the time and sold most of its public equity holdings to Ken Griffin's Citadel. In less than four months, a new round of concentrated AI position liquidation has played out again, once more revealing how, when leverage is used, crowded positioning can turn into a liquidity crisis in an extremely short period of time.

The uptick in short-selling activity also confirms the breadth of market stress. According to Goldman Sachs data, short bets across companies in October were near a five-year high, volatility in tech stocks surged sharply, the S&P 500 fell about 1% over the month, while the Nasdaq and semiconductor sectors were hit far more severely.