A market rout in October walloped hedge funds, forcing them to unwind positions at the highest rate in years and cut staff. The pain left many nursing deep losses even before the stock selloff intensified Thursday.

Funds trading everything from artificial intelligence and healthcare stocks to risky corporate debt felt the pain.

Samlyn Capital, a hedge-fund firm that manages around $7 billion, is narrowing its focus to trading financial-services stocks, resulting in the departures of other sector heads and members of its investment staff, according to people familiar with the firm. Samlyn’s fund lost about 5% this year through October, some of the people said.

Engineers Gate, a roughly $4 billion firm launched by Glenn Dubin, recently decided to shut down most of its “quantamental” strategy that combined a human approach with a quantitative one and cut all but five of that strategy’s portfolio managers, according to people familiar with the firm. The head of the business, Mike Daylamani, is leaving the firm, some of the people said.

After a strong start to the year, hedge funds began struggling in the summer and endured a particularly difficult October, helping to turn some funds’ double-digit gains into losses. This week compounded the difficulties when the market went into whiplash, rallying Wednesday after the election blue wave that put Democrats in control of both chambers of Congress before plummeting Thursday.

Technology stocks bore the brunt of the pain, with investors spooked the election results could hamper the advancement of AI stocks, even the much anticipated Anthropic initial public offering. Investors are rotating out of these more risky investments into relative safety in Treasurys and defensive stocks.

A Wednesday client note from Morgan Stanley laid out the scale of carnage for hedge funds betting on and against stocks last month. October marked the largest active unwinding of positions at stock-picking hedge funds in over a decade, with their market exposure down about 9% since June.

More than 40% of stock-picking funds were flat or negative this year through October, the Morgan Stanley note said. Broader market indexes like the S&P 500 and Nasdaq composite are still positive for the year.

Performance worsened this month. Hedge funds focused on the telecom, media and technology sector lost more than 4% on Thursday, essentially erasing year-to-date gains that were as much as 24% before this summer’s AI selloff, Goldman Sachs told clients in a note on Thursday. So-called multistrategy funds that trade across a variety of asset classes lost 1.4%, thanks in part to losses in tech and momentum investing, Goldman said.

Firms in recent weeks have been cutting teams and unwinding trades to manage their risk, actions that in turn continue to pressure popular trades held across funds. Many favored investing styles at multistrategy funds, including fixed-income and macro trading based on big-picture market moves, haven’t been working in recent months.

Arini Capital Management, a once-highflying hedge fund, massively cut its debt holdings in recent weeks, in part because of margin calls from banks it traded with, The Wall Street Journal reported.

Thursday could have generated even steeper losses, had so many funds not reduced their use of leverage, or money borrowed to amplify their bets, in prior weeks, said one bank executive who works with hedge funds.

Lone Pine Capital had gained more than 40% for the first half of the year in its hedge fund, but then suffered its worst three-month stretch in the third quarter, according to a person familiar with the firm. It lost 8.8% before fees in October and has now lost 7.5% before fees for the year through October. The firm managed about $19 billion as of September.

In a third-quarter letter to investors, Lone Pine said its performance was hurt by the sharp reversal in AI stocks and bets that it had made against companies it considered vulnerable to AI that went up in turn, the person said.

Walleye Capital also cut several stock-picking portfolio managers this week after it suffered its worst month since March 2020, according to a letter to investors reviewed by The Journal. The multistrategy fund had overseen more than $17 billion in assets ahead of its troubles. It said in a client letter it planned to return some client money after evaluating its optimal size, a step firms sometimes take to improve performance.

Engineers Gate, which Dubin stepped away from in 2020 and is run by co-founder Greg Eisner, was down in the mid-single digits through October, a person familiar with the firm said. People familiar with the firm said it remains focused on its core strategy of quantitative investing. Bloomberg earlier reported on staff cuts at Engineers Gate.