Hedge funds have slashed their bets on equities and cut their borrowings from banks as they struggle to deal with surging market volatility triggered by US President Donald Trump’s global trade war.
A sharp stock market sell-off in recent weeks on concerns about Trump’s tariffs has hit the sector particularly hard. Goldman Sachs’ Hedge Industry VIP index, which tracks funds’ most popular buys such as ad group AppLovin, chipmaker Broadcom and energy group Vistra, has tumbled 12.5 per cent since February 19 — when the S&P 500 hit a record high — compared with an 8.6 per cent drop in the blue-chip index.
As a result, hedge fund managers have aggressively cut back the size of their leveraged bets as they try to limit losses, by reducing the amount they borrow from banks to buy or bet against shares.