China’s quantitative hedge fund industry suffered one of its worst months on record in July, with long-only quant funds posting an average 17% loss as a sharp reversal in AI-linked and technology shares battered momentum-driven strategies. The damage was widespread: among more than 1,300 products tracked by Shanghai Suntime Information Technology Co., just 4% ended the month in positive territory. Funds focused on index-enhancement strategies, which aim to track benchmarks such as the CSI 1000 or CSI 500 while adding incremental returns, were among the hardest hit after the CSI 1000 Index fell almost 20% in July. The selloff was especially painful because these models had become concentrated in the market’s previous winners, leaving many managers exposed to a crowded unwind. Zhejiang High-Flyer Asset Management, founded by Liang Wenfeng, stood out in the rout, with nine products down more than 20% in July. The industry, which now manages more than 2.6 trillion yuan, or about $385 billion, is confronting the structural risk that similar momentum-based models can magnify losses when leadership in the equity market abruptly reverses.