Global Market | Hedge funds reel under pressure as volatility triggers sharp March drawdowns

Global hedge funds endured their steepest monthly losses in over two years in March 2026, as heightened market volatility linked to the Iran conflict disrupted equities and dented returns across strategies, as per a report by Reuters. According to a client note by Goldman Sachs cited by the report, the scale of the drawdown marked the worst since January 2022, underscoring the challenges faced by money managers in navigating a rapidly shifting macro environment.

The turbulence came after a strong 2025 for hedge funds, making the reversal more pronounced. During the first quarter of 2026, benchmark indices declined notably, with the S&P 500 falling 4.63% and the Nasdaq 100 slipping 4.87%, further weighing on hedge fund performance, Reuters said.

Market volatility was driven by a mix of geopolitical tensions, particularly the escalation involving Iran, alongside sharp movements across interest rates, currencies, commodities, and equity factor rotations. This combination created a difficult backdrop for strategies that typically aim to outperform broader markets.

Stockpickers Struggle Across Regions

Fundamental long/short equity strategies bore the brunt of the selloff, with negative returns recorded across all major regions. Asia-focused funds were hit the hardest, declining 7.3% in March, followed by European funds, which dropped 6.3%. U.S.-focused funds also faced pressure, ending the month down 4.3%, according to the Goldman prime brokerage report cited by Reuters.

On a year-to-date basis through March, Asia-focused funds managed gains of 6.5%, while European and U.S. peers remained in negative territory, down 1.8% and 2.4% respectively.

Sector-wise, technology, media, and telecommunications (TMT) strategies were among the worst affected, with long/short funds in this space declining 7.8% in March and 11.8% over the quarter. Healthcare-focused hedge funds saw relatively smaller losses of about 0.9% for the month.

The report also highlighted sustained selling pressure, with hedge funds offloading global equities for a fourth consecutive month at the fastest pace seen in 13 years. Average long/short returns reflected the strain, with the equally weighted average down 3.96% and the median falling 4.77% in March, suggesting that larger multi-manager platforms underperformed.

Systematic Strategies Offer Resilience

Amid the broad-based weakness, systematic long/short strategies stood out as a rare area of resilience. These strategies posted gains of 1% in March, supported by alpha generation rather than broader market movements, according to Goldman Sachs data cited by Reuters.

At the same time, both index-linked products such as ETFs and individual stocks witnessed net selling. Hedge fund leverage rose to 312.5% of assets, nearing record levels and indicating elevated risk positioning even as markets turned volatile.

North America saw particularly aggressive selling, marking the largest net reduction in exposure since April 2020, driven by an increase in short positions outpacing long investments.

Major Funds See Drawdowns

Several large multi-manager hedge funds reported notable declines during the period. Balyasny Asset Management’s flagship fund fell 4.3% in March and 3.8% for the quarter, according to a source cited by the report. ExodusPoint Capital also recorded losses of 4.5% in March, ending the quarter down 2%.

In Asia, performance was mixed. Hong Kong-based Pinpoint Asset Management reported a 2.45% decline in March but maintained a quarterly gain of 4.02%. Singapore’s Dymon Asia posted a 4.3% monthly drop while delivering approximately 6% returns for the quarter.

The sharp drawdowns highlighted the risks of crowded positioning and elevated leverage in volatile markets, as rapid shifts in correlations and forced de-risking exposed vulnerabilities even in diversified multi-strategy funds.