Walleye Capital is cutting back its core long-short equities operation, returning an unspecified amount of client capital and dismissing the unit's head after a technology-led market selloff produced the $17 billion hedge fund's worst monthly result since March 2020.
The multi-strategy firm lost 5.9% in October and was down 6.8% for 2026 through the end of that month, according to a client letter from founder and chief investment officer Thomas England. The losses arrived as a sharp reversal in U.S. technology and artificial intelligence-linked shares hit hedge funds that had built large positions around the sector's earlier gains.
England told clients that Anil Gondi, who led Walleye's long-short equity business, had been dismissed. A substantial share of the firm's internal staff dedicated to fundamental long-short investing will also be laid off, while the remaining team will report directly to England.
The planned redemption gives Walleye's clients a way to reduce their exposure after a difficult period, while shrinking the firm's own internal equity operation. The amount of capital to be returned and the timetable for doing so were not disclosed.
Tech reversal forces changes at multi-strategy funds
Walleye's reorganization followed a violent retreat in technology shares. The Nasdaq dropped more than 5% in a single session, while a semiconductor index fell about 12%, according to the figures cited in the client materials. The chip-sector move ranked among its steepest daily declines since March 2020.
Goldman Sachs' prime brokerage data showed hedge funds net sold roughly $20 billion of technology stocks over two weeks. In five trading days, the bank said managers had eliminated their net-long exposure to AI stocks that had accumulated since early 2025.
That selling matters for multi-manager hedge funds because their equity businesses often distribute capital among numerous portfolio managers running distinct strategies. A sudden increase in volatility can expose crowded positions, forcing managers to reduce risk at the same time and making it harder for individual teams to recover quickly.
Walleye hired Gondi in July 2025. Before joining the firm, he had worked as an equity stock picker at Balyasny Asset Management and founded 6elm Capital. The unit had already experienced a senior departure before the October selloff: chief operating officer Matt Giannini left in September to return to Citadel.
The changes place England more directly in charge of the surviving internal equity operation. They also indicate that Walleye is treating October's loss as an operational issue requiring a reduction in capital and staffing, rather than solely a temporary market drawdown.
Engineers Gate cuts its Synthesis team
Engineers Gate, a New York-based systematic hedge fund, also moved to reduce its equities organization. The firm is parting ways with most members of its Synthesis team, including unit head Mike Daylamani, according to a client letter obtained by Bloomberg.
The Synthesis business accounted for about 14% of Engineers Gate's total market value near the end of October, the letter said. Five fundamental portfolio managers will remain at the firm, leaving Engineers Gate with a smaller discretionary-equities footprint inside a business better known for systematic trading.
People familiar with the matter told Bloomberg that Engineers Gate was down 5.5% in October through October 23. The firm also made changes to a limited number of lower-conviction portfolios and continued a plan to internalize its Asia business.
The Walleye and Engineers Gate decisions reflect different models facing the same pressure. Walleye's response centers on a core long-short team within a broader multi-strategy platform, while Engineers Gate is trimming a fundamental unit within a systematic fund. In both cases, firms are reducing organizational complexity after losses in equity strategies tied to a difficult technology market.
October losses spread across major platforms
Other large hedge fund platforms also reported October declines. Millennium Management's flagship multi-strategy fund fell 2.3%, while Marshall Wace's Eureka strategy dropped 5.4%. ExodusPoint Capital Management lost 2.4%, and North Rock Capital declined 2.3%, according to the figures in the supplied material.
Point72 Asset Management and Schonfeld Strategic Partners also recorded October losses, though their exact results were not provided. The breadth of the declines suggests the pressure extended beyond one firm's stock selection or risk controls.
Goldman Sachs reported that corporate short-selling activity was near a five-year high in October, pointing to more defensive positioning across hedge fund portfolios. The S&P 500 fell about 1% during the month, but losses in the Nasdaq and semiconductor-linked stocks were steeper. That gap was painful for funds with concentrated exposure to AI-related shares, chipmakers and technology supply chains.
The October disruption followed another shock earlier in the year. In July, AI-focused fund Situational Awareness lost 67% of its portfolio value and sold most of its public equity positions to Citadel, according to the supplied account. That episode and the latest round of hedge fund losses show how quickly concentrated thematic portfolios can unravel when market leadership reverses.
Crypto markets face a risk-sentiment test
The stock-market decline does not establish that digital assets will move in lockstep with technology shares. Cryptocurrency markets have their own catalysts, including on-chain activity, stablecoin flows, token-specific developments and changes in market liquidity. Yet a broad reduction in risk appetite among large trading firms can affect several asset classes simultaneously, particularly where leverage is involved.
Hedge funds that trade both equities and digital assets may reduce positions across portfolios when volatility rises or when risk limits are breached. That can raise short-term correlation between crypto assets and technology stocks, even if the relationship weakens once forced deleveraging ends.
The more immediate signal from Walleye and Engineers Gate is institutional caution around high-volatility equity exposure. Hedge fund managers are responding through staff reductions, portfolio changes and capital returns rather than assuming the technology selloff will rapidly reverse. For crypto traders, the relevant development is a more defensive cross-market environment in which liquidity and leverage can become more important than bullish long-term narratives.
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