3 Major US Banks Hedge Funds Trade with Confirm Sharp Pullbacks

Morgan Stanley, JPMorgan Chase, and Goldman Sachs are three of the largest prime brokers on Wall Street trading with hedge funds. The latter encountered sharp pullbacks, leading them to dial back their positions over the past week.

We find this US stock market-related report about hedge funds important for our readers to learn today. We think it will help them stay updated and help their investments in the US equity markets.

Hedge funds are actively managed investment pools accumulating funds from investors and invest in securities and other investment types to get positive returns.

According to the definition on the US Securities and Exchange Commission’s website, they are limited to institutional investors, including pension funds, and wealthier investors who can afford hedge fund investing’s risks and higher fees.

Long-short equity funds that pitch themselves on the capability to safeguard client money in down markets have lost grip of 18.3 percent for the year up to and including last Wednesday, May 11, per Goldman Sachs approximations.

Furthermore, the S&P 500 index has plummeted for six consecutive weeks in a tumultuous stretch. The latter is what left Wall Street’s benchmark share barometer down by nearly a fifth from the summit it reached at the start of 2022 before a dramatic swing higher last Friday, May 13.

According to the update posted online by global business publication the Financial Times, hedge funds focused on US equities are pulling back sharply on their wagers.

This development comes following the longest stretch of sustained selling in over ten years left plenty of hedge fund managers nursing off losses. The declines have been astonishing for hedge funds invested heavily in the financial market’s riskier corners, including lossmaking technology firms.

Hence, traders cautioned that there could be a spate of massive redemptions that prompt hedge fund closures.

At Morgan Stanley, its US long-short hedge fund clients’ gross leverage that attempts to profit on stocks falling or rising this week plummeted to its lowest level since April 2020.

It was merely 15 percent above a low hit in March of that year when the coronavirus or COVID-19 pandemic pushed the United States into recession.

Morgan Stanley professionals noted that those hedge funds were again selling stocks, though they had also added to their short trades, which are wagers that could pay off if an index or stock drops in value.

Executives at JPMorgan’s prime brokerage unit reported similar findings to Morgan Stanley. They pointed out that there were indicators that the US stock market could be close to discovering a bottom.

Nonetheless, the JPMorgan professionals cautioned that hedge funds still had room to cleave their exposure to the market. Last Thursday, May 12, Goldman Sachs reported five successive days of declines in gross leverage, a gauge of a hedge fund’s overall exposure to stock-price moves, among its US long-short equity hedge fund clients.

Such incident is the largest reduction since the US investment bank started tracking the figures in 2016. We think this news about US hedge funds is important for our followers to know.

It reports that these investment pools are stepping away from risk-taking and wagering on US stocks as Wall Street equities endure the longest selling streak since 2011.

If our readers are hedge fund investors or managers themselves, we think this news can help them stay updated and proactive on how to deal with their investments.

We also believe our readers will understand further how the current financial market works and behaves in these economically challenging times.

Binary Options Zone Copyright © 2019