HedgeCo.Net (Palm Beach Gardens, FL)

Multistrategy hedge funds—long touted as the industry’s bulletproof titans—saw their haven appeal take a bruising this week, as aggressive de-risking and market turmoil exposed cracks in their armor. According to Goldman Sachs Group Inc.’s prime brokerage desk, giants like Citadel, Millennium Management, and Point72 Asset Management faced significant losses as they unwound positions at a pace not seen since the COVID-19 meltdown of March 2020. The unwind, peaking earlier this week, has left investors questioning whether these behemoths can still deliver in a storm.

The trigger? A relentless equity selloff that’s shaved nearly 9% off the S&P 500 since its late-February high, fueled by recession jitters and tariff threats from the Trump administration. Hedge funds, caught in the crossfire, dumped stocks at the fastest clip in five years, with Goldman’s data showing a five-day de-risking streak that outpaced even the darkest days of 2022’s bear market. Multistrategy funds, typically lauded for their nimble, market-neutral plays, weren’t immune—Citadel and Point72, in particular, saw their portfolios bleed as systematic and discretionary bets soured.

Yet, it’s not all doom. Goldman’s analysis, shared exclusively with HedgeCo.net, reveals a silver lining: multistrategy funds still outperformed their single-strategy peers. While the average hedge fund tracked by Goldman’s prime brokerage lost 2% this week, multistrategy portfolios cushioned the blow with diversified exposures—think macro bets offsetting equity long-short misfires. Point72, for instance, leaned on its macro muscle to limit damage, while Millennium’s pod structure absorbed shocks better than most.

The broader hedge fund universe isn’t faring as well. Asia-focused funds, as we reported earlier today, dodged the worst with a mere 0.71% dip, buoyed by China’s rebounding markets. But U.S.-centric players? They’re down 2.6%, and global funds aren’t far behind at 1.7%, per Morgan Stanley’s latest tally. The contrast underscores a painful truth: multistrategy’s supposed invincibility hinges on execution, and this week, execution faltered.

Market chatter on X today paints a grim picture. “Multistrats are bleeding, but they’re still the least bad option,” one trader posted, echoing a sentiment HedgeCo.net hears from allocators. Another quipped, “Citadel’s down, but they’ll arbitrage their way out by Monday.” Maybe. Goldman’s leverage metrics hint at a rebound—gross leverage among multistrategy funds dropped to its lowest since mid-2024, signaling room to reload once volatility eases.

For now, the haven narrative is on life support. Investors who piled into these funds expecting stability—Citadel’s $50 billion AUM empire alone draws billions annually—are rethinking their bets. “It’s a wake-up call,” a source close to Millennium said. “Diversification’s great until everything correlates in a panic.”