Updated Version 1 - Goldman Sachs states that hedge funds are massively liquidating stocks, with intensity comparable to the early days of the pandemic
Goldman Sachs report shows that the closing scale of hedge funds on single stocks is the largest in over two years, similar to the situation at the beginning of the pandemic in 2020. U.S. stock indices plummeted, with the Nasdaq index falling by 4%. Goldman Sachs pointed out that the overall leverage ratio of hedge funds reached a five-year high of 2.9 times, and a risk-averse trend appeared in 10 industries. Investors are concerned that highly leveraged hedge funds may continue to reduce risk, affecting market recovery
(New Details)
Reuters New York, March 10 - A report released by Goldman Sachs on Monday showed that hedge funds' closing positions in single stocks on Friday were the largest in over two years, with some activities comparable to those in March 2020, when portfolio managers reduced market risk exposure at the onset of the COVID-19 pandemic. Major U.S. stock indices plummeted on Monday, with the Nasdaq index (.IXIC) falling by 4%, as concerns grew that President Trump's tariff policies could push the U.S. economy into recession. James Koutoulas, CEO of hedge fund Typhon Capital Management, said, "This is a typical deleveraging crisis."
Goldman Sachs specifically pointed out that the scale of hedge fund sell-offs in single stocks was the largest in over two years, noting that some hedge funds' large-scale de-risking measures in concentrated trades were comparable to those in March 2020. Goldman Sachs also mentioned January 2021, when hedge funds were forced to close short positions on so-called "meme stocks" (stocks popular among retail investors).
The hedge fund closures come as the industry's leverage reached record levels. Another report from Goldman Sachs indicated that the overall leverage of hedge fund equity positions was 2.9 times their book value, marking the highest level in the past five years.
Some investors told Reuters that they were concerned that some highly leveraged hedge funds might continue to reduce risk in the coming days, potentially hindering a market recovery.
Goldman Sachs noted that among 11 global sectors, 10 showed a trend toward risk aversion, primarily in the industrial sector.
Goldman Sachs stated that on Monday morning, before the major indices fell further, equity long-short strategy hedge funds were down 1.5%, while systematic funds were down 0.3%
