Hedge funds have significantly reduced their investments in Chinese equities, selling approximately 80% of the stocks they purchased since late September, according to Goldman Sachs. This reversal follows a period of aggressive buying during a market squeeze, where many funds bought at high prices and were forced to sell at lower values. The turmoil in China's market has also led to the shutdown of some hedge fund strategies, including an arbitrage strategy that suffered heavy losses. Analysts note that hedge funds are currently underweight in U.S. equities compared to market benchmarks, indicating a shift in investment strategy amidst the ongoing volatility in China.