U.S. fundamental long/short hedge funds cut leverage at their fastest weekly pace since the March 2020 market shock, according to Goldman Sachs prime brokerage data dated Nov. 9, adding to a risk-off backdrop that has weighed heavily on technology shares and could keep pressure on crypto-linked risk appetite.
Gross leverage at U.S. fundamental long/short funds fell 8.7 percentage points during the week to 207.5%, while net leverage declined 3.7 points to 43.3%, Goldman said. Net leverage, which measures long exposure after short positions are taken into account, fell to the 0th percentile relative to the past five years. The funds long/short ratio dropped to 1.527, placing it in the bottom 1% of observations across both three- and five-year periods.
The scale and speed of the move suggest portfolio managers were reducing directional stock exposure rather than merely rotating between sectors. Beta-adjusted gross leverage, a measure that accounts for the volatility of holdings, dropped by nearly 16 percentage points in one week. Year to date, gross leverage has declined by 11 points and net leverage by 11.6 points.
Crypto markets often trade alongside high-beta technology stocks during broad liquidation episodes, particularly when systematic strategies and derivatives hedging amplify selling across liquid assets. The Goldman data does not measure digital-asset positioning, but it shows the equity side of the risk complex was being actively de-risked rather than absorbing a routine sector pullback.
Technology stocks led the liquidation
Information technology was Goldman s largest net-sold sector in both its global and U.S. trading-flow data. By percentage, global technology selling matched one of the largest net-sell weeks in the firm s records dating to 2016. Four of the past five months have ranked among the five heaviest technology-selling periods in that dataset.
Goldman s U.S. trading desk clients had sold more than $30 billion of technology stocks since early October, including TMT and communication-services names. That compares with approximately $21 billion to $23 billion of selling during July s momentum reversal, making the current selling episode about 30% to 40% larger, according to the bank.
About $6 billion of the technology selling occurred during the latest week. Nov. 6 brought the first net-buying session after seven consecutive days of net selling, with roughly $1 billion of net purchases. One positive session offers limited evidence of a durable reversal, especially as positioning in the so-called Magnificent Seven and hyperscale cloud companies remained near historical highs in Goldman s prime book.
Industrials were the second-largest net-sold sector globally and recorded their biggest percentage net selling in five years. Electrical equipment, building products, aerospace and defense, and trading companies led the outflows. Passenger airlines and machinery were among the few industrial groups that saw net buying.
Systematic strategies could extend selling pressure
Systematic and commodity trading adviser strategies added another source of pressure. Goldman estimated that CTAs sold around $11.6 billion of S&P 500 futures and $3 billion of Nasdaq futures over five sessions last week. Model signals were negative in about 50% to 60% of global equity markets, including the S&P 500 and most major benchmarks.
Goldman s scenario analysis indicated CTAs could remain net sellers over the coming week even if markets stabilize. The models projected approximately $23.3 billion of selling in a flat-market scenario, $3.9 billion if equities rise, and as much as $48.7 billion if markets decline.
Over a one-month horizon, the models would turn materially positive only in a strong market rally, implying about $74 billion of global equity buying. A down-market scenario pointed to as much as $149.5 billion in global equity sales.
Such model-driven activity can matter beyond stocks because futures markets, options dealers, and cross-asset portfolios increasingly transmit volatility between major risk assets. A falling equity market does not mechanically force selling in Bitcoin or other digital assets, but a synchronized reduction of leverage can reduce demand for volatile holdings across portfolios.
Funds preserved capital better than the S&P 500
U.S. fundamental long/short funds lost 1.94% during the week, compared with a 4.74% decline in the S&P 500 Total Return Index, Goldman estimated. Global peers lost 1.48%.
The relative performance reflects the protection that short positions provided as equities fell. Even so, U.S. stock pickers remained behind the benchmark for the year, returning 5.47% year to date compared with 8.43% for the S&P 500.
Across Goldman s global prime brokerage book, including macro and systematic accounts, gross leverage edged up 0.1 percentage point to 314.2%, an 85th-percentile reading for the past year. Net leverage fell to the fourth percentile, while the long/short ratio reached the third percentile. That combination points to portfolios retaining substantial gross activity while carrying relatively little net confidence in a sustained market advance.
Global fundamental long/short net leverage fell to 45.3%, the lowest level of the past 12 months and the bottom percentile over both one- and three-year comparisons. Goldman said the global long/short ratio was the lowest in its book over the past five years.
Volatility signals remain unsettled
Several derivatives indicators showed markets were pricing greater stress, though not necessarily an extreme capitulation. Goldman s panic index reached 9.57 last Thursday before finishing the week at 9.2. The bank said readings above 9 have historically coincided with buy signals.
Liquidity conditions were less reassuring. S&P 500 futures order-book depth stood at $4.15 million, below an $11.40 million average cited by Goldman. Thin order books can magnify price moves because relatively small sell orders can move futures prices more sharply.
One-month implied correlation, which reflects the extent to which options markets expect stocks to move together, climbed to roughly 26% after sitting below 10% during the summer. The spread between Nasdaq and S&P 500 implied volatility widened to nearly nine percentage points, showing traders were paying more for protection against swings in technology-heavy equities.
Goldman s risk-appetite index stood at -0.65. The bank cited -1 as a level associated with a buy signal, compared with -2.03 at the March 2020 market low. The measure therefore showed deteriorating sentiment without reaching the deepest stress level in its historical comparison.
Inflation and Nvidia are the next tests
Fund flows and corporate repurchases could provide counterweights to hedge-fund selling. EPFR data cited by Goldman showed $89 billion of net inflows into global equity funds for the week ending Nov. 4, including $37 billion into U.S. funds. Four-week inflows totaled about $265 billion globally and $111 billion for U.S. funds.
Corporate demand has also increased as blackout restrictions ease. Goldman said about 90% of S&P 500 companies were out of buyback blackout periods, with that figure expected to reach roughly 93% by the weekend. Discretionary open-market repurchase orders rose to 33% from 22% a week earlier, while execution volume ran at about 1.6 times the prior year s daily average.
The next major tests for risk markets are U.S. consumer price data on Tuesday and Nvidia s earnings report on Nov. 17. A softer inflation reading or resilient technology earnings could ease the deleveraging impulse. A negative surprise, particularly after a historically large reduction in hedge-fund exposure, would leave systematic selling and fragile market liquidity as immediate sources of downside pressure for equities and crypto-sensitive assets alike.
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