Hedge funds net-sell US stocks as shorts surge 2.4x

Goldman Sachs prime brokerage data show hedge funds moved to net sellers of US equities in the week of June 12-18, ending four weeks of net buying. Short-selling activity accelerated and ran roughly 2.4 times the level of long buying.

Macro-focused products, including indices and ETFs, recorded their first net outflows in five weeks, with short positions outnumbering longs at about a 2.4:1 ratio.

At the single-stock level, hedge funds were net sellers for a second consecutive week, though the volume of single-stock selling was modest compared with the rise in shorting.

Short interest within ETFs was concentrated in technology exposures and Asia-Pacific strategies. Some covering occurred in ETFs tied to financials, healthcare and credit-linked products.

Regionally, net selling was concentrated in North America and Europe. Developed Asia registered more resilient flows and less pronounced net selling.

Sector flows showed information technology and industrials as the main sources of net selling, while financials, materials and energy recorded net buying.

Fundamental long-short equity strategies outperformed broader global equity benchmarks in the same week. The long-to-short balance on fundamental positions remained near historic highs.

Overall leverage in US long/short strategies fell to one of its lowest readings of the past year, while net leverage remained around the 74th percentile.

Short exposure increased in higher-valuation areas such as technology, gross exposure was trimmed and certain long positions were maintained.