Investors in the US have started to dial back their use of leverage for the first time since financial markets were rattled by the coronavirus last year, removing some of the borrowed money that has fuelled the market rally since last year.
Investors had borrowed $844bn against their portfolios in July, down from a record $882bn a month earlier and the lowest level since March, according to data collected by Wall Street’s self-regulatory body, the Financial Industry Regulatory Authority.
Separate data from Goldman Sachs, which runs one of the largest prime brokerages in the world, showed that the investment bank’s hedge fund clients had cut both net and gross leverage in recent weeks. Morgan Stanley has also seen long-short equity hedge funds that trade through it reduce their leverage, while bankers at other large New York-based prime brokers said a similar trend was under way.