Quant Hedge Funds Hit Worst Drawdown Since October as Crowded Trades Unwind
Quantitative hedge funds have started 2026 in the red, suffering their worst short-term losses since October as crowded bets in US stocks unwind and hit systematic trading strategies. Early January marked the weakest 10-day stretch for systematic long-short equity managers in more than three months, with losses reaching about 1 percent according to Goldman Sachs prime brokerage data. Most of the pain came from crowded positions in US equities, echoing similar setbacks that hit quant portfolios in June and July of last year.
UBS prime book estimates show US-focused quant hedge funds lost around 2.8 percent in the first two weeks of 2026, with one of the sharpest deleveraging events since late December. Goldman analysts pointed to three main strains on performance: losses in crowded longs, short exposure to high-beta stocks, and adverse idiosyncratic moves.
This drawdown highlights ongoing challenges for systematic strategies in environments where many models are positioned similarly and liquidity dries up when risk sentiment shifts. It comes on the heels of a volatile period in 2025 when many quant managers posted positive full-year results but also endured major drawdowns amid momentum reversals and rallies in lower-quality stocks.
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