In March 2025, US hedge funds sharply cut back on their risk exposure, with net leverage dropping by 7%—the lowest level since 2016, according to Goldman Sachs. This marks a significant move to reduce risk amid growing market uncertainty.
Goldman Sachs reports that the net leverage of US fundamental long/short hedge funds has dropped by 6.4 points so far this month, potentially the biggest monthly decline since they began tracking in January 2016.
The data suggests that hedge funds are pulling back due to concerns about a possible liquidity crunch or a spike in market volatility—similar to what was seen during the financial crises of 2008 and 2020.
Interestingly, this pattern of deleveraging tends to occur in turbulent economic conditions. Goldman Sachs Asset Management notes that hedge funds often adapt better and even perform well during times of high inflation and market swings.
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