Hedge funds at the fastest pace in more than five years added bearish bets in Japanese stocks in a week between Aug 2 and Aug 8, according to Goldman Sachs in a note Friday, when the Nikkei dropped by the largest amount for the index since Black Monday in 1987 on Aug 5.
Equity long/short hedge funds increased 1.7 shorts, or bets that stocks will fall, for each long position sold in the week between Aug 2 and Aug 8, the bank said.
Japanese stocks collapsed on Monday as a sell-off triggered by economic concerns and the unwinding of a popular yen trade financing investment in stocks reverberated across markets worldwide.
During the five-trading day week that ended on Aug 8, portfolio managers sold more Japanese stocks than they added to their short positions in four trading sessions, with only Tuesday being an exception.
According to Goldman Sachs, hedge funds’ net exposure to Japanese equities stood at 4.8 per cent on Thursday, down from 5.6 per cent a week earlier.
It was reported that hedge funds, for a fourth week running, bet against worldwide equities, adding more short positions as mayhem spread across the shores.
Goldman Sachs, one of the largest prime brokers in the world, tracks the flows of its hedge fund clients to report on trends.
Long/short hedge funds focusing on global equity fundamentals were down 1.34 per cent for the week amid the market rout, while systematic long/short funds posted gains of 0.77 per cent.
