Biotechs, regional banks, and ETFs are top bearish targets as hedge funds borrowing surges
Hedge funds are diving back into aggressive short positions, pushing gross leverage — the total amount of borrowed capital used to amplify bets — to a record high, according to the latest Hedge Fund Trend Monitor from Goldman Sachs Prime Services.
The new data shows a dramatic increase in short selling, particularly in exchange-traded funds (ETFs) and sector-specific stocks like biotechnology firms and regional financial institutions.
Key Stats From the Report:
- $218 billion in ETF short positions
- $948 billion in short positions in individual stocks
- The surge in ETF shorting marks the largest monthly increase in over 10 years
What’s Driving the Trend?
The renewed bearish stance reflects growing uncertainty in the markets — especially around interest rate expectations, fragile financial institutions, and the underperformance of biotech.
Shorting involves selling borrowed stock with the aim of buying it back cheaper — and profiting from the decline. The strategy becomes more attractive in volatile or overvalued sectors.
Sector Focus: Biotech and Banks
According to Goldman’s analysis, hedge funds are aggressively shorting:
- Biotech stocks, likely due to poor earnings, rising costs, and low funding visibility
- Regional financials, which remain under pressure post-bank-crisis and amid tightening credit conditions
What Is Gross Leverage?
Gross leverage measures the total exposure (long + short) relative to hedge fund capital. A rising gross leverage indicates hedge funds are borrowing more to amplify both bullish and bearish bets — a sign of increased conviction, but also heightened risk.
What This Means for Markets
High short interest can signal:
- Bearish sentiment among institutions
- Potential for short squeezes if sentiment rapidly shifts
- Increased volatility in the sectors being targeted
Whether this is smart hedging or a warning of further downside remains to be seen — but one thing is clear: hedge funds are gearing up for a choppy ride.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
Related:
Trump says he’ll delay a threatened 50% tariff on the European Union until July
Angry Elon Is Back — And He’s Betting Big on Driverless Teslas and AI
Elon Musk’s Qatar Meltdown: “NPCs,” Jeffrey Epstein, Tesla Denial, and Prison Promises
Trump Escalates EU Trade Clash With 50% Tariff Threat: “The Deal Is Set”
Most Trump Crypto Dinner VIPs Have Moved or Dumped Their Coins: Inside of Dinner
US at risk of stagflation, Fed right to hold: Jamie Dimon
Why ‘Sell America’ is trending on Wall Street
Trump’s ‘Big, Beautiful Bill’ Moves Forward — But Sparks Backlash Over Debt and Benefit Cuts
Bloomberg Terminal Outage Disrupts Bond Auctions Across Europe
