Equity-focused hedge funds made their largest reduction in active investments in more than a decade in October, while Morgan Stanley reported $57 billion in leveraged ETF selling on Nov. 5 and a 5% one-day decline in U.S. long-short hedge-fund net leverage. Market risk exposure fell approximately 9% since June in one Morgan Stanley client report, while position cuts through actual trading equaled 10.7% of the market value of stock holdings at the end of June. More than 40% of funds had flat or negative returns by the end of October as AI-related stock losses reversed earlier gains. Goldman Sachs said technology, media and telecommunications funds lost more than 4% on the sharp market decline, while multi-strategy funds fell 1.4%. The strategy of buying AI beneficiaries while shorting companies expected to be harmed by AI expansion also failed as both positions moved against investors. The resulting losses are prompting further risk reduction and organizational changes, including Samlyn Capital's decision to focus on financial stocks and Engineers Gate's downsizing of its investment organization. The simultaneous unwinding of long positions in AI beneficiaries and losing short positions raised concerns about further selling, margin calls and broader market instability, although some analysts said earlier deleveraging limited losses.