Hedge funds' net exposure falls to 21st percentile, signaling renewed caution
- Goldman Sachs’ prime brokerage desk said hedge funds used last week’s record S&P 500 rally to cut U.S. equity risk, trimming longs and shorts fastest since September. - Goldman said U.S. long-short gross leverage fell 4.6 percentage points in a week, while net leverage sat near 75%, the 21st percentile on a one-year basis. - The pullback leaves managers defensive despite strong 2025 returns and fresh inflows into hedge funds. (goldmansachs.com)
Hedge funds used last week’s record run in the S&P 500 to cut risk, not add it, according to Goldman Sachs’ prime brokerage desk. (finance.yahoo.com) Goldman’s team led by Vincent Lin said funds cut the total size of their U.S. equity long and short books by the most since September 2025. The move was concentrated in single stocks rather than broad index hedges. (finance.yahoo.com) (idnfinancials.com) One widely cited Goldman trading-desk snapshot put overall book gross leverage near 310%, but net leverage around 75%, only the 21st percentile versus the past year. That means funds still had large books on, but much less directional conviction after hedges were netted out. (investing.com) Net exposure is the gap between bullish positions and bearish ones. A fund can keep a lot of trades on and still run cautiously if its longs and shorts largely offset each other. (investing.com) That posture helps explain the disconnect in recent weeks: headline indexes hit records, but many hedge funds were using strength to de-gross and lower single-name risk. Goldman said U.S. long-short gross leverage dropped 4.6 percentage points in the week. (finance.yahoo.com) (theedgemalaysia.com) The caution stands out because the industry came into 2026 with momentum. Goldman said hedge funds posted a second straight year of double-digit returns in 2025 and attracted net inflows after several leaner years. (goldmansachs.com) Goldman’s 2026 industry outlook said net leverage in its prime book was near three-year highs at the end of 2025. By late April 2026, desk commentary showed managers had turned far more selective as macro and geopolitical risks rose. (marquee.gs.com) (investing.com) Other bank surveys still show investors want more hedge fund exposure this year. BNP Paribas said 64% of allocators planned to increase exposure on a net basis in 2026, even as managers kept emphasizing tactical trading and lower correlation. (globalmarkets.cib.bnpparibas) The message from the latest positioning data is narrower than a broad market call. Hedge funds are still active, but with net exposure sitting well below recent norms, they are carrying more insurance into the next stretch of earnings and macro headlines. (investing.com)
