Hedge funds are rebuilding equity exposure after sharply reducing risk in late July, with investors once again adding to long positions as the latest market rally gains momentum, according to a report by the Wall Street Journal citing a note from the prime brokerage division at Goldman Sachs.
Global equities were net purchased by hedge funds for a second consecutive week in the five trading sessions through last Thursday, according to Goldman Sachs.
Gross trading activity also accelerated, reaching its highest pace in seven weeks. Long purchases exceeded short sales by 1.4 to one, signalling a renewed willingness among hedge funds to take directional risk.
The shift marks a significant reversal from late July, when managers moved defensively as a selloff in artificial intelligence-related stocks unsettled markets.
Hedge funds responded by cutting equity exposure, selling long positions and closing short trades. The turbulence contributed to a difficult month for the industry, with the broad PivotalPath hedge fund index declining 0.8% in July.