After four consecutive weeks of buying, hedge funds made a sharp reversal, with short-selling forces leading to net sales in U.S. stocks.

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Hedge funds' attitude toward the US stock market shifted noticeably last week.

According to the latest data from Goldman Sachs’ prime brokerage, after four consecutive weeks of net buying, hedge funds turned to net selling in the week from June 12 to June 18. The expansion of short positions outpaced long buying, becoming the dominant direction.

This shift was reflected simultaneously in both macro products and individual stocks. Macro products (combined indices and ETFs) recorded net selling for the first time in five weeks, with the ratio of short selling to long buying reaching 2.4 to 1. At the individual stock level, there was a small net selling for the second consecutive week, with the long-short ratio at 1.1 to 1. From a regional perspective, all major regions except developed Asian markets experienced net selling, with North America and Europe seeing the largest net selling scale.

It is noteworthy that these position adjustments occurred against a backdrop of overall strong market performance. During the same period, Goldman Sachs’ equities long-short fundamental strategy estimate rose 4.53%, far exceeding the MSCI World Total Return Index’s 1.89% gain. This shows that hedge funds as a whole are still benefiting from the current rally, but have begun to proactively trim risk exposure on the margin.

Short Selling Dominates, Macro Products Bear the Brunt

The core driving force behind net selling this week comes from aggressive expansion of short positions, rather than active reduction of longs.

At the macro product level, net selling occurred for the first time in nearly a month, with the ratio of short selling to long buying reaching 3.8 to 1, noticeably stronger than the overall data’s 2.4 to 1. On the ETF short side, short selling intensified for technology, Asia-Pacific, and large-cap equity ETFs, partly offset by short covering in financials, healthcare, and credit ETFs, resulting in little overall change.

For individual stocks, the situation is more differentiated. Despite a slight overall net selling (deviating -0.2 standard deviations from the one-year average), globally, individual stocks actually showed net buying, with the ratio of long buying to short selling at 1.5 to 1. This means the net selling pressure this week mainly concentrated on indices and ETFs, rather than wholesale retreat from individual stocks.

Leverage Structure Tweak, Net Exposure Remains High

Position structure data show hedge funds are becoming more cautious overall, but net exposure has not shrunk significantly.

Total leverage for US long-short strategies declined by 3.4 percentage points to 207.3%, at the 4th percentile of the one-year period, indicating leverage levels have compressed to a historically low range. Meanwhile, net leverage remains nearly unchanged at 54.5%, at the 74th percentile for the year, still at relatively high levels, indicating fund managers have not significantly reduced net long exposure.

Fundamental long-short ratio (by market value) rose slightly by 1% to 1.714, at the 98th percentile for the year, close to historic highs, reflecting that fundamental strategies’ long positions still hold a significant advantage over shorts. Overall, these position adjustments are more about marginal hedging against macro risks, rather than systemic de-risking.

Sector Divergence: Net Selling in Tech and Industrials

In terms of industry distribution, seven out of eleven global sectors saw net buying this week, with funds concentrating in financials, materials, and energy; industrials, information technology, and utilities had the highest net selling.

The information technology sector faced net selling, consistent with increased short activity in technology ETFs, suggesting hedge funds have a more conservative short-term attitude toward the tech sector. The financial sector saw net buying, which aligns with short covering in financial ETF shorts, showing distinctive capital rotation across sectors.

Against a backdrop where overall market sentiment has yet to clearly shift, these structural portfolio adjustments by hedge funds may signal greater profit-taking pressure in high-valuation sectors such as technology in the short term.

Risk Warning and DisclaimerThe market has risks, and investment must be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their specific circumstances. Investments made based on this article are at your own risk. ```