Walleye Capital, a hedge fund managing over $17 billion, sent a letter to investors: experiencing the worst monthly performance in six years, will lay off employees and return funds

Original: Walleye Capital

Compiled by: Jiahua, ChainCatcher

On November 5, U.S. tech stocks experienced a significant sell-off. The Nasdaq Composite Index fell by 5.5%, and the S&P 500 Index dropped by 4.4%. Chip stocks saw particularly notable declines: SanDisk fell by 22.3%, Micron Technology dropped by 17.5%, AMD fell by about 17%, and NVIDIA dropped by 9.3%. Investors are reassessing the impact of the U.S. midterm election results on AI data center construction and whether the massive investments in AI can yield sufficient returns.

The market turbulence has also drawn attention to the situation of hedge funds. Walleye Capital, which manages over $17 billion, lost 5.9% in October, marking its worst monthly performance since March 2020.

Subsequently, the company stated in a letter to investors that it would streamline its internal long/short equity business, part ways with relevant management and a significant portion of the investment team, and plans to return some funds to investors. Walleye emphasized that the company will not exit long/short equity investments and will allocate more resources to volatility, quantitative, and external investment businesses in the future.

Letter from Walleye Capital to Investors

I believe that discipline, humility, and self-awareness are crucial for achieving long-term success. The year 2026 is already challenging, and after experiencing our worst month since March 2020, we conducted a thorough review of all aspects of the company.

Based on this consideration, we are streamlining our internal long/short equity business. This decision includes parting ways with the management of the long/short business and a significant portion of the internal long/short investment team. We will also increase our investment in businesses that have proven to have unique competitive advantages, including volatility, quantitative, and external investment businesses.

At the same time, we evaluated the optimal size of the fund and plan to return some funds. We will further communicate with each investor regarding the amount, timing, and specific methods of this fund return.

Since 2023, the internal long/short equity business has been our weakest-performing strategy, significantly lagging behind our external long/short business. Over the past few years, we have invested considerable effort to improve the internal business, including bringing in new management. These efforts did not yield the expected results, and the opportunity cost and resources consumed were too high relative to the returns.

However, this has also led us to recognize an important lesson: our competitive advantage does not lie in attempting to replicate the traditional multi-manager long/short equity model.

We will not exit this asset class of long/short equity. We will continue to participate in long/short equity investments through collaboration with external managers, as we have done for over the past decade; continue to provide initial funding for newly established external long/short funds; and continue to gain relevant investment exposure through our most confident long/short portfolio managers. These managers, along with future internal long/short portfolio managers, will report directly to me.

This decision is part of the overall adjustment the company began in 2023. At that time, we merged two funds into one, strengthened the management team, and focused resources on the most advantageous businesses. Most of these efforts have been effective.

Today, our volatility business is larger, broader, and more profitable than ever. October was the best month in the history of this business, and in terms of profit and loss in dollars, 2026 is expected to be its best-performing year. Over the past two years, we have hired nearly 20 volatility portfolio managers, making it the fastest-growing area for internal portfolio managers.

Despite a relatively weak performance in 2026, quantitative investment remains a business with lasting advantages, having built a successful track record over the past decade. We have full confidence in Rob and his team and will continue to invest resources in this business through Quantic and the company's central quantitative team.

External long/short equity investments and initial funding investments will remain core to our future business, supported by the experience we have accumulated over more than a decade, as well as the naturally formed strategic alignment with Dockside and institutional partners.

My partners Tom (responsible for project sourcing and relationship management) and Chris (responsible for risk management) will re-engage in the management of external long/short business with their respective teams and will report directly to me, as they did for most of 2024 and 2025.

As Walleye continues to evolve, "balance sheet" strategies such as reinsurance, U.S. Treasury basis trading, and equity capital markets, although relatively small in scale, also provide valuable supplements to our business. We will continue to seek attractive opportunities for investors in this area.

This is a proactive decision we made after ongoing discussions. We still see strong demand from investors for increased exposure to volatility, quantitative, and external strategies. Feedback from several large partners further confirms the rationale for streamlining the internal long/short business, as this move will allow the fund to focus more on the distinctive businesses that initially attracted them to choose Walleye.

Thank you all for your continued support.