Crowded Trades Leave Hedge Funds Suffering in Stock Rally, Says Goldman Sachs

Global hedge funds using algorithms to trade stocks experienced one of their worst days of the year on Thursday, as a sharp rally in shares caught them off guard. Systematic fund managers, particularly those with short bets on highly traded stocks, found themselves stuck in losing positions as they tried to exit crowded trades. The index tracking these funds had its third worst single day of the year, finishing down 1.1%. The rally was fueled by hopes that global rate hikes are over, as well as positive quarterly financial updates.