NEW YORK – Global hedge funds and levered exchange-traded funds (ETFs) dumped more than US$40 billion (S$54 billion) of stocks at a breakneck pace, growing increasingly bearish after President Donald Trump’s shock announcement of harsher-than-expected global tariffs, according to bank notes to clients on April 4.
Since late on April 2, when Mr Trump boosted tariff barriers to their highest level in more than a century, S&P 500 companies have lost over US$4 trillion in stock market value.
JPMorgan said in a note that volatility targeting portfolios had between US$25 billion and US$30 billion in equities to sell in the coming days, as they unwind positions to reduce risk.
Levered ETFs had an additional US$23 billion to sell to rebalance into the close today, mostly tech stocks, JPMorgan said.
Macro systematic strategies on April 3 also sold stocks at higher-than-expected levels while a renewed meltdown on Friday would force them to sell more, the bank added.
Other strategies also fueled the selloff. In a separate note, Goldman Sachs told clients that equities long/short hedge funds across the world underwent the largest selling on a net basis in almost 15 years on April 3, while also turning the most bearish since 2011.
Goldman Sachs and JPMorgan, which provide trading and leverage for hedge funds, track industry trends through their clients. JPMorgan also said it uses some estimates.
Goldman did not provide the net selling dollar amount and did not immediately respond to a request for comment.
The bank said in the note that portfolio managers mainly added bets against stocks as well as credit and equity exchange-traded funds on April 3, although they also ditched long positions following Trump’s announcement of new import tariffs that sparked recession concerns.
US stocks led the hedge fund sales, with financial shares being net-sold at the fastest pace since 2016.
Real estate, staples and utilities, which tend to navigate recessionary environments well, were the only sectors investors bought on a net basis, the bank added.
With more bearish positions in their portfolios, long/short hedge funds were outperforming the benchmark S&P 500 index with a 4.2 per cent loss year-to-date through April 4 morning, while the index dipped 13.7 per cent.
Goldman said leverage levels in the hedge fund industry remain close to a one-year high. REUTERS
Join ST’s Telegram channel and get the latest breaking news delivered to you.
