By Nell Mackenzie
LONDON (Reuters) - Japan-focused hedge funds face the steepest daily performance losses on Goldman Sachs' records, the bank said in a note on Monday, following a global stock rout sparked by a soft U.S. jobs report and last week's Bank of Japan rate hike.
Monday's 12% slide in Japanese stocks led to "large performance" draw-downs for stock pickers trading on the fundamental values of company equities, said Goldman.
As of the Asia close, Japan-focused hedge fund managers were down 7.6% from the last three trading sessions. Monday's loss of 3.7% was the largest single daily performance decline in Goldman's records.
These past three trading sessions erased the entire yearly gains for these hedge funds taking their performances tracked by the bank to flat, Goldman said.
Stock markets tumbled on Monday, with Japanese shares at one point exceeding their 1987 "Black Monday" loss, as fears of a U.S. recession prompted investors to dump risk assets and wager on Federal Reserve rate cuts to rescue growth.
FRIDAY FLOWS
Hedge funds, as of Friday, sold Japan-related assets at the highest pace since COVID but exposure to the region did not fall, as fleeing long positions they U-turned and added short positions.
A short trade bets that the value of an asset will fall.
Index and exchange-traded fund products led two thirds of the selling activity in Japan. Outside of this, tech and industrial sector stocks were the most net sold on Friday, said Goldman.
Just before the markets turned, during July, Japan saw the highest influx of hedge fund trades in nine months, said the bank. Gross total and net allocations to Japan remained, on Friday, close to four-year highs, the bank added.