Hedge funds ramped up bearish positions on UK domestically focused equities in the run-up to Wednesday’s Budget, according to a report by Reuters citing a Goldman Sachs client note circulated prior to Chancellor Rachel Reeves’s statement.
The note highlighted that stock-picking hedge funds built their largest net short in UK domestic names since 2023, while reducing long exposure to the same cohort to the lowest level in more than a year. The shift reflects expectations that higher taxes would weigh on consumer demand, investment and earnings for companies reliant on the UK economy.
Reeves unveiled a fiscal package that Deutsche Bank estimates will deliver close to £35bn in savings, and while the measures aim to stabilise public finances, managers warn that tighter fiscal policy is likely to depress near-term growth — reinforcing the case for caution toward UK-centric sectors.
Goldman noted that hedge funds began accelerating UK equity sales in late October, initially targeting businesses with primarily domestic revenue. In November, managers also turned sellers of UK-listed multinationals, reversing a multi-month trend of adding exposure to firms with overseas earnings.
Equity long-short funds trading UK and European stocks are down roughly 3% month-to-date, the note said, with losses concentrated in industrials, communications and domestically exposed companies. Year-to-date, European-focused stock pickers have returned 8.5%, trailing Asia-focused funds at 21% and US-focused funds at nearly 12%.
