Goldman Sachs: The scale of the "deleveraging crisis" of hedge funds can be compared to the early stages of the COVID-19 epidemic.

Goldman Sachs pointed out in a report released on Monday that last Friday, hedge funds closed out their positions in individual stocks at the highest level in over two years. Some trading activities were comparable to those in March 2020, when portfolio managers were cutting market exposure during the pandemic. Due to concerns in the market that President Donald Trump's tariff policies could drag the world's largest economy into a recession, major US stock indices fell sharply on Monday, with the Nasdaq index falling by 4%. James Koutoulas, CEO of Typhon Capital Management, said, "This is a typical deleveraging crisis." Goldman Sachs explained in detail that the selling of individual stocks by hedge funds was the largest in over two years. The report also added that some hedge funds' significant risk reduction measures in concentrated trades could be compared to the situation in March 2020. The report also mentioned January 2021, when hedge funds covered short positions in "Meme stocks" that were popular among retail investors. The hedge funds' closing actions occurred at a time when industry leverage ratios were at historic highs. Another report by Goldman Sachs showed that hedge funds' overall leverage ratio on equity positions reached 2.9 times their net worth, the highest level in the past five years. Some investors told foreign media that they were concerned that some highly leveraged hedge funds may continue to de-risk in the coming days, potentially hindering the market's potential recovery. Goldman Sachs noted that hedge funds unwound both crowded long and short positions. Goldman Sachs found that out of 11 global sectors, 10 showed a risk-averse trend, with the industrial sector being particularly evident. This risk-averse trend was reflected in all regions, with the US being the most pronounced. According to Goldman Sachs, on Monday morning, before further declines in major stock indices, long-short equity hedge funds fell by 1.5%, while systematic managed funds fell by 0.3%.