RE: Hedge Funds rush to reduce shorts - FT5 Feb 2023 02:00
Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/4766bedc-3eb3-4272-8806-383045983537
Accessibility helpSkip to navigationSkip to contentSkip to footer
Sign In
Subscribe
OPEN SIDE NAVIGATION MENU
MYFT
MENU
Financial Times
Sign In
Prepare for the year ahead with the FT’s unrivalled insights for leaders.
Subscribe and save 33%
Hedge fundsAdd to myFT
Hedge funds rush to unwind bets on falling markets as stocks surge
Funds seek to cover short positions at a faster pace than height of 2021 meme stock frenzy
The scale of hedge fund buying helped fuel a 3.3 per cent jump in the Nasdaq index on Thursday © AP
Hedge funds rush to unwind bets on falling markets as stocks surge on twitter (opens in a new window)
Hedge funds rush to unwind bets on falling markets as stocks surge on facebook (opens in a new window)
Hedge funds rush to unwind bets on falling markets as stocks surge on linkedin (opens in a new window)
Hedge funds rush to unwind bets on falling markets as stocks surge on whatsapp (opens in a new window)
Save
Laurence Fletcher in London FEBRUARY 4 2023
109
Print this page
Receive free Hedge funds updates
We’ll send you a myFT Daily Digest email rounding up the latest Hedge funds news every morning.
Hedge funds wrongfooted by a sharp surge in stocks this week rushed to exit losing bets on falling markets at the fastest pace in years.
Equity markets have risen sharply so far this year, led by many of the speculative stocks that were clobbered hardest during 2022’s global sell-off. Many of the funds that profited from the rout have found themselves poorly positioned for the rebound, which has recently accelerated as investors sensed that interest rates were close to peaking in many major economies.
The resulting flurry of short covering — when investors buy back stocks they had been betting against to limit their losses — was the largest since November 2015, according to a Goldman Sachs note to clients seen by the Financial Times.
The scale of hedge fund buying, which helped fuel a 3.3 per cent jump in the Nasdaq index on Thursday, eclipsed that seen in January 2021, when retail investors co-ordinating their actions on forums such as Reddit sent the price of GameStop and other meme stocks rocketing, inflicting huge losses on some funds.
Funds closed their bets primarily against US stocks but also against European companies.
Bets against stocks that had previously been falling for a long period were “under MAX pressure”, Goldman wrote in a separate note on Thursday seen by the FT.
“We saw [an] explosive move higher” in software stocks “driven by c