Goldman: hedge funds increased bearish bets, new shorts are three times of longs

Global hedge funds continued to increase their bets on falling stocks in their portfolios in the week to August 1, as the latest data raised concerns about the US economy slowing faster than expected, according to a note to clients from Goldman Sachs.

This marks the third consecutive week that hedge funds have been increasing their bets on a stock market decline faster than they have been adding long positions, and noted that each long position is being offset by 3.3 short positions.

The Nasdaq Composite fell into a correction zone on Friday, after two days of economic data showing the economy slowing faster than expected. Job creation was below expectations and manufacturing activity fell. The index closed down 2.43 per cent.

Hedge funds reduced their exposure in 11 of the 11 industries, including financials, industrials, real estate and energy. Healthcare stocks were also sold at the fastest pace in about a year.

In another note, Goldman Sachs said that hedge funds have been unwinding risk positions for several weeks, and that on Friday, long/short funds had their worst day since June 2022, with their performance averaging a 1.8 per cent loss.