Chinese Quant Funds Hit by July AI Stock Rout, Pure Long Products Down 17%

Chinese quantitative hedge funds suffered a heavy setback in July as AI-related stocks fell sharply, pushing some funds' returns since the start of 2026 into negative territory, while others only slightly outperformed equity benchmarks. Nine products managed by the hedge fund of Liang Wenfeng, founder of AI company DeepSeek, and tracked by data agencies, all fell more than 20% last month. Pure long-only quantitative funds in China averaged a 17% loss in July, with only 4% of more than 1,300 tracked products posting positive returns.

Data show that of the nine products managed by Liang Wenfeng's hedge fund, all but one were in loss territory for 2026; the only fund still posting positive returns was up just 0.04% for the year. The global selloff in AI-related stocks last month dealt a broad blow to Chinese quantitative funds, with the rout at one point pushing US company Situational Awareness into difficulty and causing losses at multiple global hedge funds. As investors rushed to dump stocks, the CSI 1000 index in the Chinese market fell nearly 20%.

The shock comes after years of rapid expansion for Chinese quantitative funds. The performance of such strategies is typically measured by excess returns, or the extent to which a fund manager's investment returns exceed the market benchmark index. However, for many Chinese quantitative funds, the July plunge effectively erased the excess returns accumulated since the start of 2026.