HEDGE FLOW-October was a month to forget as AI rout hit returns

LONDON, Nov 3 (Reuters) - Hedge funds had a bruising October, when returns fell and performance lagged that of major stock market indexes, driven by the rout in tech stocks, according to from major investment banks.

"October is a month that most HF (hedge funds) will probably want to forget," JPMorgan said in a note to clients.

• JPMorgan estimates global hedge fund losses were 2.6% between October 1 and 29, and would likely be close to 3.5% in October, including the final day of the month

• "Most of this can be traced back to AI/tech as credit concerns and lacklustre earnings have not been able to stem the tide thus far. Broader indices in the US and Europe were basically flat to up this past month, which makes the HF pain stand out even more," JPMorgan said

• The Nasdaq 100 index, which contains many tech heavyweights, fell 6.6% last month, its biggest monthly fall in 18 months, as third-quarter earnings disappointed.

• Google parent Alphabet GOOGL.O shares fell nearly 19% in October, and chipmaker Intel's shares fell 45%, both marking their biggest monthly fall on record, according to LSEG data. In contrast, the S&P 500 dropped 0.5% and Europe's STOXX 600 rose 1.8%. .SXP .STOXX

• Various types of hedge fund strategies suffered. Systematic long-short hedge funds, whose algorithms ride market trends until they peter out, saw a 3.6% decline in October, according to Goldman Sachs

• Stock-picking fundamental long/short funds saw a 3.5% decline. Goldman said it was the first time, according to its records, which date back to 2016, that monthly returns from both cohorts fell by more than 3%

• Societe Generale said short fixed-income and long equity positions were the most notable detractors for trend-following strategies in October. "Slower strategies were hardest hit by the reversal, while faster strategies benefited from reducing their positions more aggressively"

• The rout in tech stocks sent investors scrambling to government bonds. The 10-year Treasury yield, which moves inversely to its price, fell 36 basis points in October, the most since December 2023. US10YT=RR

(Reporting by Alun John; Editing by Amanda Cooper)

((alun.john@thomsonreuters.com;))