By Nell Mackenzie
LONDON (Reuters) – Hedge funds last week jettisoned global stocks and added bets they would decline, said Goldman Sachs, just before U.S. President Trump announced tariffs that sent global markets tumbling.
Global shares slid on Monday after U.S. President Donald Trump announced sweeping tariffs on Canada, Mexico and China at the weekend, kicking off a trade war that could curb economic growth internationally.
Hedge funds in the week to Friday sold their stock holdings in every geographical region apart from developed markets in Asia, a Goldman Sachs note published Friday and seen by Reuters on Monday showed.
The selling was the largest since August, when a stock market meltdown that started with the unwinding of yen carry trades rippled through to U.S. tech stocks, said the bank.
Hedge funds bet against all sectors, but industrials, consumer discretionary, energy and communications services equities bore the brunt of the selling.
The number of short positions, betting on falling industrial stocks, approached almost twice the number of longs that wagered this sector would rise, said Goldman data.
Real estate stocks were the only sectors where hedge funds bet that values would rise, said Goldman Sachs.
Here, hedge funds bought stocks for the fourth straight week and at the fastest pace in two months, said the bank.
All kinds of listed real estate stock have been popular with hedge funds including residential, retail and health care, it said.
“Real estate often performs well in inflationary environments, as property values and rents tend to rise with inflation,” said Bruno Schneller, managing director at Erlen Capital Management.
“If trade wars lead to higher import costs and broader inflationary pressures (via tariffs), real estate becomes an even more attractive hedge against eroding purchasing power.”
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and Christina Fincher)
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