TOP STORY: Hedge funds are dumping short positions at their fastest pace since January as returns continue to lag the MSCI and bets on a recession continue to falter, according to a report by Reuters.
Hedge funds are dumping short positions at their fastest pace since January as returns lag the MSCI and bets on a recession continue to falter, according to a report by Reuters.
The failure of short bets on declining stock prices is seen as one reason why hedge funds are exiting trades at one of the highest rates seen in the past five years.
New U.S. inflation data has strengthened hopes of an improved economic outlook, which has helped drive share prices higher. MSCI’s broadest global stock index has risen more than 15% in 2023. In contrast, long/short equity hedge funds have gained 5.8%, while quantitative strategies are up 3.2%,
Hedge funds exited negative wagers aimed at specific energy, financials, and healthcare names, though food and drink, I.T. and real estate companies saw an uptick in shorting activity, according to a Goldman Sachs note. While 60% of the trades that were abandoned were in U.S. stocks, hedge funds also ditched bets on so called macro products, related to how currencies, commodities and bonds react to the broader economic environment.