Hedge Funds
Hedge funds cut equity risk at the fastest pace in over a decade in early November, Morgan Stanley data shows
Prime brokerage figures point to heavy de-risking in the first week of the month, led by Asian technology positions and a sharp one-session drop in US net leverage.
HedgeWeekly Hedge Fund Desk ·
Global equity hedge funds reduced risk in the first week of November at the quickest rate in more than ten years, according to Morgan Stanley prime brokerage data reported by Hedgeweek on 11 November. The bank's figures show gross market value in long/short equity books down 10.7% since late June.
The retreat was sharpest in the US and Asia. US net leverage fell 5 percentage points in a single trading session to 42%, while Asian gross leverage slipped 3 points to 124%, close to the 123% trough reached during the April 2025 tariff turmoil. Asian cuts centred on technology names, particularly in Taiwan and South Korea.
Performance diverged by region. Asia-based managers lost an average 1.5% over the week against a drop of more than 5% in the MSCI Asia-Pacific Index, leaving them up about 2.6% for the year. US-based managers stand at roughly 6% year to date. Hong Kong and China were the only markets with net buying, as funds covered domestic shorts amid state-backed intervention, and China-focused equity strategies gained an average 1.1% to reach 6.7% for 2026. The report ties the selling to concern over AI valuations and the US midterm elections.
Why it matters: a decade-fast cut in risk shows how quickly crowded positions are being unwound, which can deepen price swings in the sectors funds are leaving. For allocators, the data is a reminder to check leverage, regional exposure and technology concentration across their managers, and to expect more dispersion between those that de-risked early and those that did not.