Hedge funds suffered the "biggest retracement" since April last year, especially the "long-short stock strategy" with excessive positions in Europe and South Korea.

# Zhao Ying

Source: Wallstreetcn

As fighting in the Middle East continues to escalate, global hedge funds are suffering their worst losses since last year’s tariff turmoil. Data from JPMorgan shows that **CTA quantitative funds have lost nearly 4% so far in March**, while **equity long-short funds are on track for a 3% decline**. Massive unwinding of crowded positions has inflicted heavy losses on these fast-money investors. JPMorgan strategists warned that, from a positioning perspective, **equities are more vulnerable than bonds**.

Hedge funds are experiencing their sharpest drawdown since last year’s tariff disturbance, with crowded trades being liquidated in a wave that has devastated the fast-money community.

In a report released on Wednesday, JPMorgan strategists noted that since the outbreak of the Middle East conflict, quantitative strategies including Commodity Trading Advisors (CTAs) have faced their worst performance period in nearly a year. Meanwhile, equity long-short hedge funds have posted steep losses, due to heavy positioning in Europe and South Korea and underweight exposure to the software sector.

Top-tier hedge funds including Citadel, Millennium, and Point72 all suffered massive single-week losses, with the hardest-hit losing as much as **$1.5 billion** — wiping out nearly all of their year-to-date gains in just one week.

The deepening crisis in the Middle East has erased trillions of dollars in global equity market capitalization over the past two weeks and pushed oil prices above **$100 per barrel** for the first time since 2022. JPMorgan strategists believe that, based on current positioning, **equity assets are now more vulnerable than fixed income**.

## Multi-strategy funds under broad pressure, equity positions the biggest drag

CTA funds typically capture market trends by tracking momentum across futures markets.

Citing HFR data, JPMorgan reported that **systematic diversified CTA funds have lost nearly 4% in March**. A separate index compiled by Société Générale shows the strategy has dropped more than 2% this month.

Equity long-short strategies are also under significant pressure. JPMorgan’s HFRX Equity Hedge Index, which tracks long-short funds, is **heading for a 3% decline in March**. Data from Goldman Sachs’ Prime Brokerage showed that in the week ending March 6, hedge funds increased short positions on equity ETFs by 8.3%, signaling rising risk aversion.

A team led by JPMorgan strategist Nikolaos Panigirtzoglou wrote in the report:

> Looking ahead, from a positioning standpoint, equities are more vulnerable than bonds.

> Previously crowded dollar short positions against emerging market currencies now appear to have been mostly closed.

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