Hedge funds focused on the technology sector saw the largest monthly decline since 2008 in July, according to HFRI.
The HFRI Equity Hedge (Total) index fell by 1.85% in July, driven down by the HFRI EH: Technology index, which declined 7% in the month.
The HFRI EH: Fundamental Growth index also weighed down the aggregate numbers, with a 4.2% fall.
The slide in AI-related equities as well as deterioration in prospects of an end to the Iran war meant the HFRI Fund Weighted Composite index fell 1.1 overall.
The July decline bucked a positive trend for the asset class, with the second quarter of 2026 delivering a 6.4% rise, which was the best quarter for the asset class since the final one of 2020.
Some strategies benefitted from the market conditions, with macro sub-strategy performance led by the HFRI Macro: Commodity index, which rose 2.2%.
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Fixed income-based, interest rate-sensitive strategies had mixed performance in July as bond yields rose while the Federal Reserve left rates unchanged. The HFRI Relative Value (Total) index rose 0.2%.
Kenneth J. Heinz, president of HFR, said: “Hedge funds navigated an extremely intense and volatile trading environment in July, with exposure to negative technology momentum contributing to the largest decline for technology hedge funds since 2008.
“The macroeconomic outlook for the second half of the year presents a mixed picture for broader financial markets, with investors facing an ever more complex landscape shaped by evolving AI expectations, geopolitical risk, supply chain pressures, interest rate uncertainty, and shifting political dynamics.
“These are conditions in which the most agile and experienced hedge fund managers are likely to differentiate themselves and lead industry gains.”
