Morgan Stanley monitoring: Global equity hedge funds November sharply de-risk in the first week
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AT A GLANCE
Reports say global equity hedge funds November sharply reduced risk in the first week, but leverage remains high, and a short-term bottom is only an institutional assessment.
Article
⚡️Rare de-risking wave in more than a decade as global equity hedge funds November accelerate their retreat
BlockBeats reported that,November 11, the latest monitoring report released Tuesday by Morgan Stanley's prime brokerage team showed that global equity hedge funds undertook their most aggressive de-risking in more than a decade during the first week of November. A broad wave of position closures is spreading across global markets.
In Asian markets, hedge funds are reducing risk exposure through a combination of cutting long positions and adding bearish short positions. The trend is particularly pronounced in South Korea's tech-heavy market. Selling pressure is being driven primarily by fundamental stock-picking funds, while multi-strategy, macro and quantitative funds are taking the opportunity to close existing short positions, highlighting a clear divergence in institutional strategies.
Goldman Sachs data, meanwhile, show that deleveraging has not yet fully run its course. Gross leverage among its US fundamental long/short funds fell by 8.7 percentage points in a single week, the largest decline since the outbreak of the pandemic in 2020 March; but across its entire PB client base, overall gross leverage remained as high as 314.2%, at the 1 th percentile over the past 85 years.
JPMorgan's assessment is more optimistic. Dubravko Lakos-Bujas, the bank's head of global markets strategy, believes the correction is essentially a concentrated deleveraging by momentum traders and that “capitulation selling has already gone quite far.” Technical indicators suggest that signs of short-term oversold conditions and a potential bottom are accumulating.
On November 11, BlockBeats cited a report from Morgan Stanley's prime brokerage team saying that global equity hedge funds undertook their most aggressive de-risking in more than a decade during the first week of November.
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The report said Asian hedge funds reduced risk exposure by cutting long positions and adding bearish short positions, with the trend particularly pronounced in South Korea.
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Selling pressure in Asia was driven primarily by fundamental stock-picking funds, while multi-strategy, macro and quantitative funds closed existing short positions.
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According to Goldman Sachs data cited in the article, gross leverage among US fundamental long/short funds fell by 8.7 percentage points in a single week, the largest decline since 2020 March; gross leverage across its entire PB client base remained at 314.2%, in the 1 th percentile over the past 85 years.
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Dubravko Lakos-Bujas, JPMorgan's head of global markets strategy, believes the correction is primarily a concentrated deleveraging by momentum traders and that signs of short-term oversold conditions and a potential bottom are accumulating.
AI-assisted interpretation
The following is analysis, separate from reported facts. Verify important claims independently.
This report describes funds reducing risk in their equity trading: some are selling long positions and adding bearish short positions, while others are closing existing short trades. Actions differ across strategies. Goldman Sachs data cited in the report also show that leverage has fallen significantly among some funds but remains high across its entire client base. JPMorgan's comments on a potential bottom are an assessment, not a confirmed outcome.
Why it matters to readers
The material presents types of information: sharp risk reduction, persistently high overall leverage, and an institutional assessment that the market may be bottoming. None of these alone can determine the market's next direction.
Distinguish between positioning and leverage data and institutional views on market direction. Funds reducing positions does not mean all strategies are selling, and oversold signals do not confirm that the market has bottomed.
Risks and unknowns
The material is a news report and does not provide the original Morgan Stanley, Goldman Sachs or JPMorgan reports for verification.
The data for US fundamental long/short funds and the entire PB client base cover different populations and cannot be directly compared as though they represent the same group.
Short-term oversold conditions and a potential bottom are institutional assessments. The material does not confirm that the market has bottomed or state when deleveraging will end.
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The material provides no specific trading data for crypto assets or Hong Kong stocks, so their impact cannot be determined.
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