Hedge Funds Cut Equity Exposure at Fastest Rate in Two Months

Hedge funds that use Goldman Sachs’ Prime Services cut global equity exposure at the fastest pace in two months in the most recent reporting week, based on Goldman Sachs’ Prime Services data.

The weekly reduction measured 2.3 standard deviations below the average level recorded over the prior year and was the first weekly decline among Goldman-serviced hedge funds in a month. Sales of long positions outpaced the creation of new short positions by a ratio of 1.8 to 1, so the drop in exposure stemmed mainly from trimming existing long stakes rather than adding offsetting short bets.

Selling was broad-based across regions, with North America and emerging Asian markets posting the largest declines in dollar terms. By sector, information technology saw the largest percentage fall in gross exposure in more than two years as funds cut long holdings. Energy was the only sector with net buying, registering its strongest weekly inflows in almost four years and recording net purchases in 12 of the past 13 weeks.

Aggregate net leverage across Goldman’s Prime Services book fell to 76.8%, placing hedge fund positioning at the 27th percentile of its range over the past year. The data cover changes in gross and net exposures, regional and sector breakdowns, and leverage metrics for the most recent week and reflect positions held by hedge funds that use Goldman Sachs’ prime brokerage.