Key Takeaways
- • Net leverage across Goldman Sachs' prime brokerage book fell 4.2 percentage points to 73.4% in October, its steepest monthly decline in seven months, according to Goldman Sachs prime brokerage data.
- • Fundamental long-short equity funds lost 3.5% and systematic strategies lost 3.6% in October, the first month since Goldman Sachs began tracking in 2016 that both groups each lost more than 3%.
- • Hedge funds were the largest net sellers of global equities in seven months, with sales of existing longs outnumbering short sales four to one.
- • Roughly $20bn of technology stocks were sold over two weeks, approaching the $23bn sold during July's market unwind; five consecutive sessions of AI-related selling from 8 to 14 October erased all net purchases of the sector since the start of 2025.
- • Asia-focused hedge funds averaged losses of 9.4% for the month, while European overweights reached a one-year high of 3.5%.
Summary
Hedge funds reduced leverage at the fastest pace since March in October as sharp losses across fundamental and systematic strategies triggered widespread de-risking, according to Goldman Sachs prime brokerage data reported by Investing.com and Hedgeweek. Fundamental long-short equity funds declined 3.5% during the month and systematic strategies lost 3.6%, marking the first time since Goldman Sachs began tracking performance in 2016 that both groups posted monthly losses exceeding 3%.
Prime brokerage clients were the largest net sellers of global equities by dollar amount in seven months. Sales of existing long positions outnumbered short sales by roughly four to one. Technology stocks accounted for much of the reduction, with approximately $20bn sold over two weeks. Five consecutive sessions of AI-related equity selling between 8 and 14 October erased all cumulative net purchases of the sector since the beginning of 2025.
Trading reflected selective rotation rather than indiscriminate selling. Information technology, industrials and materials recorded the largest net outflows, while consumer discretionary, real estate and healthcare attracted buying. Hedge funds also increased exposure to macro products and index instruments while reducing single-stock positions. Asia-focused funds were particularly hard hit, averaging losses of 9.4% for the month, and larger managers generally underperformed smaller peers.
European equities were comparatively resilient. Hedge fund overweights to the region reached a one-year high of 3.5%, with the UK, France and Spain among the most actively purchased markets.
Prime brokerage clients were the largest net sellers of global equities by dollar amount in seven months. Sales of existing long positions outnumbered short sales by roughly four to one. Technology stocks accounted for much of the reduction, with approximately $20bn sold over two weeks. Five consecutive sessions of AI-related equity selling between 8 and 14 October erased all cumulative net purchases of the sector since the beginning of 2025.
Trading reflected selective rotation rather than indiscriminate selling. Information technology, industrials and materials recorded the largest net outflows, while consumer discretionary, real estate and healthcare attracted buying. Hedge funds also increased exposure to macro products and index instruments while reducing single-stock positions. Asia-focused funds were particularly hard hit, averaging losses of 9.4% for the month, and larger managers generally underperformed smaller peers.
European equities were comparatively resilient. Hedge fund overweights to the region reached a one-year high of 3.5%, with the UK, France and Spain among the most actively purchased markets.
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