Global long-short equity hedge funds underperformed sharply during the recent US stock market surge but showed resilience as markets turned volatile again, according to a report by Reuters citing prime brokerage data from Morgan Stanley and Goldman Sachs.

On Wednesday, 9 April, the S&P 500 jumped 9.5% following US President Donald Trump’s decision to delay certain tariffs for 90 days. However, global long-short hedge funds gained just 0.98%, while US-focused hedge funds fared better with a 2.28% gain – still well behind the benchmark’s rally.

The rebound was short-lived though. On Thursday, equities reversed course, with the S&P 500 down 3.5% and the MSCI World Index off 1.2%, rattled by renewed macroeconomic uncertainty. In response, global fundamental long–short funds tracked by Goldman Sachs fell 0.7%, while systematic funds limited losses to 0.2%. US-centric funds took the biggest hit, declining 1.4% on the day.

The muted upside came as many hedge funds were caught offside by the rally, having recently built up record-high net short positions – the most bearish stance since 2011, according to Goldman. The firm also reported the largest net selling by hedge funds in nearly 15 years during the prior week.

“Some of the activity on Wednesday was driven by short covering after Trump’s tariff pause,” said Jon Caplis, CEO of hedge fund analytics firm PivotalPath. The sharp shift in sentiment prompted funds to unwind bearish bets, with Goldman noting the largest notional US equity purchases by hedge funds in more than a decade—driven largely by macro products.

Despite missing out on gains, reduced net exposure shielded hedge funds from deeper losses during Thursday’s reversal. Managers continued to cut leverage, as per Morgan Stanley, with portfolios increasingly de-risked amid rising geopolitical and economic uncertainty.

Year-to-date through 10 April, global fundamental long-short equity funds are down 4.3%, Goldman data shows, while the S&P 500 has fallen 10.4%.