Investing.com -- Hedge funds have suffered losses across long-short strategies as the artificial intelligence and momentum trade that has dominated much of 2026 reversed since June 22, according to Goldman Sachs' Prime desk.

Systematic managers have absorbed the brunt of the downturn, falling 3.6% in what Goldman Sachs described as their worst drawdown since the summer of 2025.

The losses are said to have wiped out roughly a quarter of the cohort's gains for the year, leaving systematic funds up 10.8% year-to-date, down from a 14.4% gain recorded on June 22.

Goldman Sachs said the damage was concentrated on the short side, led by U.S. equities, followed by developed Asia and Europe, with momentum and crowded positioning identified as the main drags on performance.

Fundamental long-short managers have held up better in absolute terms, Goldman Sachs said, slipping 2.2% since June 22 while remaining up 15.5% for the year. The bank noted that only 0.8 points of that loss was alpha, with information technology and momentum exposure responsible for the damage.

Goldman Sachs pointed to how fundamental managers are responding as particularly significant, noting they are "aggressively cutting the AI longs that had generated their entire year-to-date alpha through June 22."

That unwinding has stripped momentum exposure from portfolios and pushed gross leverage into the bottom decile over the past year, according to Goldman Sachs.