Hedge funds shifted back into net selling of US equities during the week of 12-18 June, ending a four-week streak of net buying, according to a report by FutuBull citing Goldman Sachs prime brokerage data, with short-selling activity significantly outweighing long positioning.
The reversal was driven primarily by an acceleration in short positions rather than a meaningful reduction in longs, with short activity running at roughly 2.4 times the level of long buying across portfolios. This marks a clear pivot in positioning across both macro instruments and individual stocks.
Macro-focused products, including indices and exchange-traded funds, recorded their first net outflows in five weeks, with short positions dominating activity at a ratio of 2.4:1. At the individual stock level, hedge funds also remained net sellers for a second consecutive week, though the move was relatively modest overall.
The shift was broad-based across regions, with net selling concentrated in North America and Europe, while developed Asia saw more resilient flows. Within ETFs, short interest was particularly concentrated in technology and Asia-Pacific exposures, while some covering activity was seen in financials, healthcare and credit-linked products.
Despite the defensive shift in positioning, hedge funds continued to perform strongly over the same period, with fundamental long-short equity strategies outperforming broader global equity benchmarks. This suggests the reduction in risk was more precautionary than reactive, reflecting portfolio hedging rather than forced deleveraging.
Leverage data point to a nuanced picture. Overall leverage in US long/short strategies declined, falling to one of the lowest readings of the past year. However, net leverage remained elevated at around the 74th percentile, indicating that while gross exposure has been trimmed, directional market exposure remains relatively high.
Sector positioning showed clear divergence. Information technology and industrials were the primary sources of net selling pressure, consistent with increased caution toward higher-valuation segments of the market. In contrast, financials, materials and energy attracted net buying, reflecting ongoing portfolio rotation.
Within equity strategies, the long-to-short balance on fundamental positions remains near historic highs, suggesting continued conviction in selected long exposures even as macro hedging increases.
Overall, the latest data points to a market in which hedge funds are not broadly de-risking, but instead selectively increasing protection through short positions—particularly in technology—after a period of sustained equity gains.
