Hedge funds have turned increasingly cautious on US healthcare stocks, stepping up short positions as political uncertainty builds around the future of government health insurance subsidies, according to a report by Reuters.
The report cites a note from Goldman Sachs as highlighting that hedge funds were net sellers of US healthcare stocks last week for the first time in 14 weeks. The shift comes as enhanced subsidies under the Affordable Care Act, expanded during the Covid-19 pandemic, are set to expire at the end of December unless Congress intervenes. Around 24 million Americans currently rely on the subsidies, and their removal would result in sharply higher insurance costs for many households.
Goldman said hedge funds ended the week as net sellers across healthcare providers and services, pharmaceuticals and biotech companies. Life sciences and healthcare technology were the only sub-sectors to attract net buying interest. Short positions outweighed long bets by more than eight to one, highlighting a strong bearish tilt, although overall healthcare exposure remains elevated relative to one-year and five-year averages.
The repositioning reflects growing concern about rising healthcare costs and the political risk surrounding the sector. US President Donald Trump has said he intends to meet health insurers in the coming weeks to explore ways to lower prices, while Republicans in the House of Representatives have advanced legislation that would reduce premiums for some consumers but cut subsidies and raise costs for others from early 2027, shortly after the midterm elections.
Hedge fund activity suggests investors are increasingly pricing in policy-driven volatility for healthcare companies. Data from securities lending firm Hazeltree shows that, in November, telehealth group Him & Hers and scientific instrument maker Bruker were among the most heavily shorted mid-cap US stocks.
