Hedge funds slash gross leverage
- Goldman Sachs said hedge funds used last week’s record U.S. stock rally to cut both long and short equity positions at the fastest pace since September. - U.S. long-short gross leverage fell 4.6 percentage points, while technology logged its biggest weekly de-grossing since July 2024 despite still-heavy exposure. - Goldman also sees pensions selling more than $25 billion of U.S. equities at April month-end. (morningstar.com)
Hedge funds used last week’s record U.S. stock rally to cut risk, not add it, according to Goldman Sachs prime brokerage data. (finance.yahoo.com) Goldman’s team led by Vincent Lin said U.S. long-short gross leverage fell 4.6 percentage points last week, the largest notional de-grossing in seven months. (finance.yahoo.com) The selling was broad across U.S. equities, with nine of 11 sectors net sold, and it was led by long sales in single stocks rather than short covering. (finance.yahoo.com) Technology sat at the center of the move. Goldman said the sector saw its biggest weekly de-grossing since July 2024, the third-largest positioning reduction in five years. (finance.yahoo.com) Even after that cut, tech exposure stayed high. Goldman said gross allocation to technology was still 20.6% of total U.S. market value, in the 92nd percentile of the past year and 98th percentile of the past five years. (finance.yahoo.com) That leaves a split market: systematic funds such as commodity trading advisers kept buying, while hedge funds focused on company fundamentals stepped back. Goldman’s John Flood said commodity trading advisers are no longer buyers of the S&P 500 for the first time in a month. (morningstar.com) (finance.yahoo.com) Flood also said April month-end pension rebalancing points to sales of more than $25 billion in U.S. equities, one of the 15 biggest monthly sell totals recorded since 2000. (morningstar.com) He said that, excluding quarterly expirations, it would be the biggest monthly sell estimate on record. The same note said market breadth remained weak even as the S&P 500 notched its ninth record close of the year last week. (morningstar.com) Semiconductor exchange-traded funds have become one visible pressure point. Benzinga reported that iShares Semiconductor ETF SOXX fell 2.4% and VanEck Semiconductor ETF SMH fell 1.5% on April 27 as investors weighed crowded positioning. (benzinga.com) The immediate question is whether this is a brief trim after a fast rally or the start of a broader unwind in the market’s most crowded trades. Goldman’s own desk still expects any pullback to be a buying opportunity, even as clients cut leverage near the highs. (morningstar.com)
