Goldman Sachs’ prime services weekly report shows that global hedge funds reduced their exposure to US banking stocks to a near 10-year low and departed lending-sensitive stocks in response to the banking turmoil that began earlier this month.
An indicator of hedge funds’ bearish or bullish positioning revealed that investors’ pessimism increased. The ratio of their long positions to their short positions in banking ended the week of March 17-23 at 1.28, near 10-year lows. At the beginning of 2023, according to Goldman, it was 1.52.
A low ratio suggests a more pessimistic outlook.
Fears of a credit crunch in a prospective recession also led hedge funds to reduce their exposure to credit-exposed firms to the lowest level in nearly five years, according to a report based on the client books of Goldman Sachs.
This week saw the greatest notional net selling in more than a year, propelled by both short and long sales, according to a report.
The bank reported that its clients’ assets were net sold modestly for the week.
Following the failures of Silicon Valley Bank and Signature Bank in the United States and the Swiss government’s orchestrated takeover of Credit Suisse (CSGN.S) earlier this month, global regulators and central banks have taken steps to calm markets.