The recent upturn in global financial markets has prompted hedge funds to place ever risker bets as they look to maximise returns, despite the use of trading in equities already sitting at near record levels, according to a report by Reuters.
The report cites two unnamed banking sources as well as client notes from the prime brokerage divisions at Goldman Sachs, JPMorgan and Morgan Stanley that leverage used to boost returns is either at, or close to historical highs, depending on the bank.
According to Goldman Sachs, hedge fund leverage in equity positions is at almost three times their books compared with 2.35 times a year ago, while JPMorgan’s data shows current use of leverage – at roughly 2.7 times – close to a peak the highest level seen since 2017. Morgan Stanley’s data also shows that leverage in the US has only ever been higher during 2% of the past 14 years.
