The funds had been up 0.98% on the day, whereas the S&P 500 soared 9.5%, in keeping with numbers compiled by Morgan Stanley despatched to purchasers. U.S. hedge funds posted increased positive aspects, up 2.28%, however nonetheless underperformed the index.
In a sudden U-turn, Trump paused tariffs on Wednesday following a day when U.S. Treasuries offered off and confirmed indicators of dislocations as traders feared the new commerce coverage might drive the world’s largest economic system right into a recession. After his announcement, shares rallied and Treasury yields pared again some of their positive aspects.
The rally, which got here as a shock for market contributors, caught hedge funds with elevated quick positions, or bets that inventory costs would fall.
Final week, hedge funds underwent the largest promoting on a internet foundation in virtually 15 years on Thursday, whereas additionally turning the most bearish since 2011, in keeping with Goldman Sachs.
With a lowered portfolio of lengthy positions – betting costs would go up -, hedge funds didn’t take a lot benefit of the rally. “Some of the exercise (on Wednesday) was all the way down to hedge funds overlaying their shorts after Trump’s 90-day pause announcement,” stated Jon Caplis, CEO of hedge fund analysis agency PivotalPath. Nonetheless, lengthy/quick hedge funds are outperforming the S&P in 2025. 12 months-to-date by means of April 10, world funds had been down 3.14%, whereas U.S. funds fell 4.07%. The S&P 500 dropped 6.9% in the identical interval.
Morgan Stanley’s numbers additionally confirmed that portfolio managers continued to chop leverage in their portfolios. Amid uncertainty round tariffs, hedge fund managers have slashed positions to cut back danger.
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