Morgan Stanley note shows hedge funds cut equity risk at fastest pace in over a decade
A sharp retreat in positioning is spreading across global equity hedge funds as investors pull back through the first week of November. The move reflects mounting pressure on long-short stock strategies after a selloff in artificial intelligence shares intensified following the recent U.S. mid-term elections.
Highlights
- Morgan Stanley prime brokerage data shows global equity hedge funds reduced risk in early November at the fastest pace in over a decade.
- Gross market value of long-short stock funds declined 10.7% since late June, signaling significant deleveraging across hedge fund portfolios.
- AI stock rout, intensifying after the recent U.S. mid-terms, is prompting hedge funds to lower equity exposure and adopt a defensive strategy.
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Prime brokerage data signals rapid deleveraging
As reported by Bloomberg, citing Morgan Stanley, its prime brokers said in a note dated Tuesday that global equity hedge funds cut risk at the steepest rate in more than a decade through the first week of November as a broad unwind gathered pace.The gross market value of long-short stock funds fell 10.7% since late June, according to the note. The figures point to a significant reduction in exposure across hedge fund portfolios over a relatively short period.
AI stock rout drives investor pullback
The retrenchment underscores how heavily global investors are being hit by the rout in artificial intelligence stocks. That selloff is gathering momentum following the recent U.S. mid-term elections.The scale of the decline in gross exposure suggests hedge funds are moving to contain risk rather than add to positions, highlighting a more defensive stance across equity strategies.
As we noted earlier, our coverage of the Nasdaq 100 slide highlighted AI-stock weakness tied to higher rate worries.
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