Hedge funds significantly increased their exposure to global equities in the days leading up to Friday’s sharp market decline, according to a report by Bloomberg citing new positioning data from Goldman Sachs’ prime brokerage business.
The bank reported that hedge funds were net buyers of equities during the week ending 4 June, with aggregate purchases reaching the highest dollar level recorded in the past four months.
The buying activity was driven primarily by the addition of long positions, which exceeded short-selling activity throughout the period. All major geographic regions experienced net inflows from hedge fund clients, reflecting broad-based confidence in equity markets before the subsequent sell-off.
North American stocks and emerging Asian markets attracted the strongest demand, while both individual equities and macro-oriented trading instruments saw net buying.
Consumer discretionary names remained a particular area of focus. Hedge funds added to positions in the sector for a fifth consecutive week, with buying recorded across every major global region. Overall, nine of the 11 primary market sectors registered net inflows from hedge fund investors during the reporting period.
The positioning proved poorly timed as US equity markets suffered a significant reversal at the end of the week. Technology shares led the decline, dragging major benchmarks lower.
The Nasdaq Composite dropped more than 4%, while the S&P 500 recorded a fall of approximately 2.6%. The Dow Jones Industrial Average also ended sharply lower, declining more than 1%.
The setback interrupted a strong period for equities, particularly in the United States, where markets had rallied substantially from March lows. Investor optimism had been supported by robust first-quarter corporate earnings and continued enthusiasm surrounding artificial intelligence-related investment themes.
