Goldman Sachs' Hedge Fund VIP list posted its worst one-month underperformance against the S&P 500 in over 20 years in July 2026, as a violent de-grossing episode forced funds to dump their AI and semiconductor longs. The most popular hedge fund long positions cratered roughly 40% from recent peaks, while short positions meant to hedge the downside also lost money.
The most popular long positions among hedge funds have cratered roughly 40% from their recent peaks, marking the sharpest drawdown in momentum factor baskets in five years. The short side offered no refuge either, as volatile whipsaws wiped out gains on positions meant to hedge the downside.
Goldman Sachs' closely watched Hedge Fund VIP list, which tracks the stocks most commonly found in institutional long books, posted its worst one-month underperformance relative to the S&P 500 in over 20 years. That happened in July 2026, when a violent de-grossing episode forced funds to dump the same AI and semiconductor names that had driven earlier gains.
The AI trade unravels
Hedge funds sharply reduced their technology exposure in July, particularly in semiconductors, memory stocks, and AI infrastructure names. Long trimming and short covering happened simultaneously, producing chaotic price action.
Situational Awareness LP takes the brunt
No single fund illustrates the damage more than Situational Awareness LP, run by Leopold Aschenbrenner, a former OpenAI researcher who moved into hedge fund management. The fund lost approximately 67% in July alone, going from roughly $45 billion in assets under management to about $10 billion in a single month.
As losses mounted, major prime brokers including Goldman Sachs and JPMorgan issued margin calls. To meet those demands, Situational Awareness LP sold most of its public equity stakes, including holdings in Micron and SK Hynix, to Citadel at a discounted rate.
Losses across the industry, but funds still positive for the year
Equity long-short funds and multi-strategy vehicles across the industry recorded significant losses during the July episode. Despite that, US equity long-short strategies remained positive on the year, returning approximately 10% through mid-August 2026.
The episode also triggered a reduction in leverage and AI-related exposure industrywide, as funds pulled back their gross and net positioning from prior peaks. The Goldman Sachs VIP list reaching four-year lows suggests the popular hedge fund trade basket is now more washed out than at any point since mid-2022.
Source: Crypto Briefing
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