Hedge fund deleveraging accelerated late last week, impacting European stock markets and European hedge fund managers’ returns, with the impact likely to continue this week, according to a report by Reuters, citing a client note from JPMorgan.
The sell-off intensified as European equities declined further on Tuesday, following Monday’s sharp losses tied to US growth concerns and uncertainty over Germany’s fiscal reforms.
JPMorgan noted that multi-strategy hedge funds and stock pickers were forced to liquidate positions, further pressuring the market. Hedge funds shorting European companies also suffered losses as larger funds bought back short positions, driving unexpected stock price gains.
The risk of overcrowding in certain trades remains elevated, the note warned.
Stock-picking hedge funds tracked by JPMorgan finished February down 2.5% and are 1.6% down for 2025 so far. Multi-strategy funds were down 1.7% for February and 1.6% year-to-date.
