A fall in the main US stock market indexes last week which hit hedge funds' long bets prompted managers to cut their exposure to domestic stocks, according to a report by Reuters citing a note by Morgan Stanley's prime brokerage division.

The bank described last week as "ultimately one of the more challenging we have seen in recent months for the average L/S fund", with most of the impact felt in long positions.

The sell-off came as the the S&P 500 fell 0.48%, and the Nasdaq and Dow Jones declined 1.1% and 0.93% respectively, after tech companies including Dell Technologies and Salesforce fell short of expectations.

According to Morgan Stanley, hedge funds sold stocks across all regions but mainly in North America, where the selling was concentrated in the technology, media and telecommunications sector.

Hedge funds also added short trades across Europe and Asia, including Japan.