Global hedge funds have increased their bearish bets on equities on the back of growing concerns over a faster-than-anticipated economic slowdown in the US, according to a report by Reuters citing a recent client note from the prime brokerage unit at Goldman Sachs.
The trend persisted for the third consecutive week leading up to 1 August, with hedge funds adding more short positions than long ones.
Goldman Sachs highlighted that for every long position added, there were 3.3 short bets, with the bearish sentiment being fuelled by fresh US economic data indicating a slowdown. The Nasdaq Composite entered correction territory on Friday, dropping 2.43%, following two days of disappointing economic reports showing fewer job additions and a decline in manufacturing activity.
Hedge funds have reduced their exposure across seven of the 11 global sectors, including financials, industrials, real estate and energy. Healthcare stocks, meanwhile, were sold off at the fastest rate in approximately a year.
Hedge funds have been unwinding risk positions for several weeks. On Friday, fundamental long-short hedge funds experienced their worst day since June 2022, with an average performance drop of 1.8%, Goldman Sachs noted in a separate report.
