Banks provide hedge funds with leverage, i.e., in essence, a loan to finance investments, with the help of which the funds can achieve high returns, but at the same time, leverage can significantly increase losses.
Gross leverage, i.e. total borrowing, reached 270% after rising by 2.6 percentage points compared to the previous week Goldman said. According to the bank, the hedge funds that did not use algorithms and focused on equity markets were the hedge funds that increased the level of leverage.
According to Goldman’s figures, hedge funds last week on Wednesday and Thursday they started buying global stocks after three consecutive weeks of short selling, especially in the United States and Europe. Hedge funds focused their long positions on technology companies, but continued to short consumer discretionary stocks such as luxury goods and travel stocks.
The S&P 500 fell more than 5% last week from a March 28 peak, the biggest decline since October, while Europe’s broadest stock index fell 1.2%, the biggest weekly decline since mid-January.
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