Amid ongoing geopolitical tensions and inflationary problems, hedge funds have turned more bearish on global equities than at any other point so far this year, cutting their long positions and upping short bets, according to a report by Reuters.
The report cites an investor note sent by Goldman Sachs as revealing that the pivot from long to short wagers has been most pronounced in North America and Europe but also evident in Asia.
According to the note, after ending each of the last three months with a net bought position, hedge funds held a net sold position by mid-April “as managers slowed the pace of long buying while ramping up short selling activity (especially in macro products)”.
The US S&P 500 stock index is down roughly 4% so far in April, while Europe and China indices have fallen about 2% each.
In another measure of waning risk appetite, the amount of net leverage used by stock picking hedge funds to borrow for trades declined by 1.9% this month so far, according to the note, citing data to 16 April.
Consumer discretionary stocks have attracted the most interest from short-sellers, while hedge funds have also continued to short energy companies even as prices have increased amid the ongoing conflict in the Middle East.
