Hedge fund leverage drives Wall Street equities revenue record

The five largest U.S. investment banks generated $67 billion in equities revenue in the first nine months of 2026, about $7 billion above the full-year record set in 2025. Hedge fund borrowing increased demand for trading and financing services.

Goldman Sachs, Morgan Stanley and JPMorgan Chase accounted for about $52 billion, or nearly 80%, of the total. Goldman led with more than $19 billion, up 57% from a year earlier. Morgan Stanley generated about $17 billion, while JPMorgan reported $15 billion.

Hedge funds have increased their use of borrowed money to finance investments, including leveraged positions in artificial intelligence companies. Looser bank leverage requirements have supported activity in prime brokerage, where banks provide financing, securities lending and other trading services.

Goldman reported a 96% year-over-year increase in equities financing revenue in the third quarter. JPMorgan CFO Jeremy Barnum described demand for capital as “exceptionally strong” during the bank’s earnings call.

The increase in borrowing has raised concerns about concentrated hedge fund positions, particularly in technology stocks. The International Monetary Fund estimates that hedge fund assets have grown to $13 trillion from $4 trillion in 2013. Leverage accounts for much of the increase and can amplify market swings during periods of stress.

Hedge funds sold technology shares at the fastest pace in at least a decade during the latest week covered by Goldman Sachs data. Net leverage among the bank’s hedge fund clients fell to a one-year low, while technology stocks still made up nearly a quarter of their holdings as of Oct. 15.

The risks of leveraged technology positions were highlighted in July, when hedge fund Situational Awareness collapsed during a semiconductor selloff. Losses on heavily borrowed artificial intelligence trades forced the fund to unwind its positions.

Recent losses have largely been absorbed by hedge funds rather than the banks that finance them. A broader decline in artificial intelligence-related shares could put further pressure on leveraged portfolios and the prime brokerage market.