Hedge funds are offloading stocks at their fastest pace in over two years, even as markets show signs of recovery, with US funds selling equities at levels not seen since Russia’s invasion of Ukraine in March 2022, according to a recent report from Goldman Sachs.
The continued hedge fund sell-off comes amid a global market rebound, following big falls partly prompted by the unwinding of the Japanese yen carry trade at the end of July.
The Nasdaq 100, heavily weighted in technology stocks, has surged by 11%, and the S&P 500 index has risen by 8% since hitting a low on 5 August. However, Goldman Sachs analysts note that hedge funds remain cautious, with many sceptical of the current market rally and concerned about upcoming challenges, including the November US presidential election.
According to the report, short sales are a significant driver of the ongoing sell-off, especially in North American stocks, with large-cap tech companies being the most heavily sold. Hedge funds are also reducing their holdings in Asian and European markets, particularly in Japan and China.
In contrast, US hedge funds are shifting their focus toward sectors like energy, utilities, and real estate, favouring high-dividend equities as they adjust their portfolios.
