BlockBeats News, November 6: Regarding yesterday’s sharp U.S. stock market sell-off, most Wall Street traders and analysts believe the main cause was not deteriorating fundamentals, but hedge fund liquidations. Noel Smith, co-chief investment officer at Kai Asset Management, said: “A drop of this magnitude without any major market news is extremely rare. This smells like liquidation.”

In addition to Bloomberg’s report last night that multi-strategy hedge fund Walleye Capital would scale back its internal long/short equity business, the market broadly expects several funds to be undergoing outright liquidation, or “pods” (independent investment teams) within multi-strategy funds to be forced to close or unwind their positions.

A list released this morning by the well-known financial research community Special Situations also shows that several hedge funds are facing difficulties, including Axebrook, Walleye, Engineers Gate, Lone Pine, Millennium’s internal pods, Verition pods, and Samlyn. The issues mainly involve large redemptions, shutting down internal teams, or replacing PMs.

Notably, during the major turbulence in the U.S. stock market this July, the AI hedge fund Situational Awareness also faced a similar situation: its assets shrank by 67%, after which it reached an emergency exit deal with Citadel and sold most of its publicly traded stock holdings at a discount.