Hedge funds’ returns have been inconsistent in recent years. However, they still carry an aura of being manned by the smartest investors in the investment community.
![Hedge funds](https://businessbankinginsight.co.uk/wp-content/uploads/2023/05/Hedge-funds-1024x576.png)
Therefore, their activities are closely monitored by the market. The latest statistics do not reassure the rest of the investment community.
According to a compilation by investment bank Goldman Sachs, hedge funds have now taken the most cautious stance on stocks in at least 10 years.
Record-low exposure
Goldman Sachs has calculated the ratio between long positions and short positions among the world’s largest hedge funds that are clients of the bank. Currently, it is at a record-low of 1.6.
This means that as a group, they still have a positive balance towards stocks in their portfolios.
However, it is the lowest net exposure since the measurements began in 2013.
![Prime Book Long/Short ratio](https://businessbankinginsight.co.uk/wp-content/uploads/2023/05/Prime-Book-LongShort-ratio.png)
Trend-followers
Goldman Sachs’ analysis is not unique. Other measurements suggest the same cautious attitude towards stocks among hedge funds.
This exposure indicates that hedge funds, to a greater extent than before, anticipate a stock market decline.
But it does not necessarily mean that the stock market will fall.
Among hedge funds, there is also a large share of trend-following participants. They sell when the market goes down and buy when the market goes up.
The talent does not need to be greater than that.