Hedge funds are quite bearish on global equities as rising geopolitical tensions continue to deteriorate risk appetite.
According to Goldman Sachs data, the funds shorted global equities at the most aggressive pace in 13 years last month.
“Hedge funds posted the LARGEST net short positioning in global equities last month in 13 YEARS,” Global Markets Investor wrote.
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Short sales outpaced long purchases by a ratio of 7.6 to 1. Moreover, roughly 76% of those short sales were concentrated in index and ETF products. US-listed ETF shorts rose 17.2%, led by large-cap equity ETFs.
Gross leverage, which measures the combined value of long and short positions, hit a fresh high. Net leverage, however, dropped. That divergence signals funds restructured portfolios heavily toward shorts rather than reducing overall size through outright selling.
Still, selling was not entirely absent. Recent data shows that institutional investors dumped $4.2 billion in US equities in a single week, bringing the seven-week cumulative total to a negative $17.7 billion. Single stocks alone saw $5.9 billion in outflows during the period.
Meanwhile, the extreme one-sidedness of current positioning carries its own implications.
“With positioning this extreme, the risk of a short-squeeze is elevated, and the market could rip higher on even a slight positive headline,” the post read.
Thus, the concentrated short positioning means any catalyst for relief, whether geopolitical de-escalation or a shift in monetary policy expectations, could snap prices higher.
The coming weeks will test whether these short bets reflect genuine conviction about deteriorating fundamentals or temporary hedging that reverses at the first sign of stabilization.
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