Hedge Funds Raise U.S. Equity Bets to Six-Month High

Hedge funds increased purchases of U.S. equities last week at the fastest pace in six months, adding net long positions and trimming short exposure to U.S.-listed exchange-traded funds, according to Goldman Sachs’ prime brokerage data.

The activity combined fresh long bets and the unwinding of bearish trades across index-linked instruments and ETFs. Short exposure to U.S.-listed ETFs fell for a second straight week. The change coincided with a continued rally in U.S. equity markets.

Financials attracted the largest net inflows in nearly six months. Buying was concentrated in long positions, with payments companies drawing the most interest and banks also seeing increased demand. Selling in consumer finance and capital markets partly offset those flows. Gross and net allocations to the sector remain near the bottom of their five-year ranges.

Industrials recorded net selling in seven of the past eight weeks, and short interest in the sector rose to elevated levels compared with a year earlier. The increase in bearish positions was driven mainly by new short trades rather than liquidation of existing long holdings.

At the stock level, selling of long positions was largely balanced by short covering, producing limited net directional changes across many names. Risk measures moved higher: U.S. long-short net leverage rose to 55.3%, toward the top of its one-year range, and the U.S. Fundamental long-short ratio reached among the highest readings over the past 12 months.

The repositioning followed a mid-May period when managers took profits in semiconductor stocks and added macro-related shorts amid concerns about higher bond yields and persistent inflation. Recent buying occurred alongside continued spending on artificial intelligence infrastructure and an earnings season that has broadly exceeded expectations.

The S&P 500 recorded nine consecutive weekly gains and the Nasdaq 100 has climbed more than 20% year-to-date.