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HedgeCo.Net \u2014 Global equity hedge funds cut risk at the fastest pace in more than a decade during the first week of November, according to a Morgan Stanley prime brokerage note dated Tuesday. The gross market value of long\/short equity fund positions has fallen 10.7% since late June, as a selloff in artificial intelligence stocks that accelerated after the U.S. midterm elections pushed managers to unwind exposure across regions.<\/p>\n
Returns were negative in every major region for the week. Asia-based managers lost an average of 1.5%, a smaller decline than the more than 5% drop in the MSCI Asia-Pacific Index, but enough to trim their year-to-date gain to about 2.6%, compared with roughly 6% for U.S.-based managers. China-focused equity strategies were the exception, gaining an average of 1.1% for the week and extending their 2026 return to 6.7%; Hong Kong and China were the only markets that saw net buying, as state-backed support prompted funds to cover shorts in domestic names.<\/p>\n
Elsewhere in Asia, managers concentrated the selling in technology, cutting longs and adding shorts most visibly in Taiwan and South Korea. Fundamental stock pickers led the selling, while multistrategy, macro and quantitative funds covered existing shorts. Gross leverage among Asian equity long\/short funds fell three percentage points to 124%, just above the 123% low reached during the tariff-driven turmoil of April 2025. In the U.S., net leverage among long\/short equity managers fell five points in a single session to 42%.<\/p>\n
The data puts numbers on the strain that surfaced in October performance reports, when crowded technology and AI-linked positions hurt both long books and shorts aimed at companies expected to lose from AI adoption. Several equity platforms have since reduced exposure or restructured teams, and the speed of the latest cut suggests the unwind was still gathering momentum in early November rather than winding down.<\/p>\n
For allocators, lower gross and net exposure typically means less beta to a continued drawdown but also less capacity to capture a rebound. The next prime brokerage readings will show whether managers keep de-grossing or begin to rebuild positions, and whether the relative resilience of China-focused and quantitative strategies holds as volatility persists.<\/p>\n","protected":false},"excerpt":{"rendered":"
HedgeCo.Net \u2014 Global equity hedge funds cut risk at the fastest pace in more than a decade during the first week of November, according to a Morgan Stanley prime brokerage note dat\u2026 Continue reading