Hedge funds withdraw from equities at record‑fast pace

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This is a movement of rare magnitude affecting the equity markets, according to Morgan Stanley's Prime Brokerage service. In recent months, hedge funds around the world have actively reduced their positions, both long and short, in this asset class.

According to data presented by Morgan Stanley Derivatives on

This reduction in gross exposure, called “de-grossing”, is thus the “largest recorded since at least 2017”, according to Morgan Stanley experts.

American hedge funds are particularly concerned by this drop in equity exposure. Indeed, according to Morgan Stanley, the gross leverage of American Long/Short funds is currently very low. When we look at the last 12 months, this leverage has in fact only been lower 10% of the time. This is therefore one of the lowest levels of leverage over a rolling year.

If Morgan Stanley analysts do not give the reasons for this decline that began in June, we can observe that, at the same time, stocks linked to artificial intelligence (AI) have declined in capitalization with the fall in their shares. Especially memory chip manufacturers like Samsung, SK hynix, Micron and SanDisk. Even recently, according to Benzinga, these four manufacturers together lost nearly $1,000 billion in stock market value between early and mid-October 2026. On October 15, the Seoul Stock Exchange index, the KOSPI, fell 7.6%.

On the American side, the S&P 500, which is the index of the 500 largest companies listed in the United States, ended the October 30 session at 7,580 points, down 1.8% over the day. A decline triggered by the collapse of Intel (-28.6%) after disappointing forecasts. The S&P 500 thus finds itself around 3% below its closing record of October 6, at nearly 7,819 points. Note, however, that since January 1, 2026, the progression of the US index remains 10.7%, even after this recent decline.

To buy stocks or ETFs after this decline in indices, an online broker like Trade Republic allows you to invest in the stock market from a single application.

Machine-translated from French