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Protective funds have reduced their bets on their capital and shorten their borrowings from the banks as they try to deal with the instability of the market caused by the global war of US President Donald Trump.
A sharp stock market sale in recent weeks about concerns about Trump’s tariffs has hit the sector particularly difficult. Goldman Sachs’ VIP VIP Index, which traces the most popular purchases of funds such as Ad Group Applovin, Chipmaker Broadcom and Energy Group Vistra, has fallen 12.5 percent since February 19th, when S&P 500 struck a high-compared record with a 8.6 percent drop in the blue chips index.
As a result, defensive fund managers have aggressively reduced the size of their encountered bets as they try to limit losses, reducing the amount they borrow from banks to buy or bet against shares.
Reducing gross positions – the combination of betting and betting betting – from Friday and Monday’s defensive funds were the largest in four years, according to a report by Goldman Sachs, and one of the largest in the last 15 years.
“There is a lot of pain there,” said one executive in a large defensive fund. “The only way to protect yourself in the environment today is to shorten your lever.”
Among the funds that will be hit during market instability is Izzy Englander’s Millennium, which manages $ 75BN in the asset. It lost 1.4 percent last week to Thursday, according to a person who had seen the numbers, as it had already lowered 0.8 percent this year to the end of February.
Ken Griffin Citadel’s defensive fund, which goes $ 66 billion in wealth, decreased 0.8 percent this year by the end of February, though Balyasny had grown 3.5 percent in its main fund.
The millennium and Citadel refused to comment.
Trump’s constant access to tariffs for US trade partners has boiled markets, while an immigration and public sector cuts have led to fear that inflation may increase and GDP growth may slow down.
VIX, the so -called Wall Street fear gauge, which measures market expectations of swimming price fluctuations, has increased to its highest level since last August.
Three people working on various protective funds with many managers who use numerous trade teams, large quantities of lever and close risk management-say that lowering positions were the largest they had seen at least at the end of 2018, when markets were selling.
The rapid landings of the Protection Fund lever from many managers can lead to shares that fall more than will “amplify market movements,” said Bank’s Governor Andrew Bailey last month.
Protection fund leaders say the current environment has led to a more volatile market in which it is more difficult to choose which shares will do well or badly in the short term.
“(There has been a) paradigm displacement which means different actions will lead, the assessment premiums change,” said one of the multi-manager.
Shares in the most popular index of the Goldman Sachs defense fund have begun to exceed the most popular long positions, causing losses for managers.
Basic short capital funds have lost an average of almost 6 percent since February 18, according to Goldman Sachs first from FT. On a 14-day basis, this marks the largest loss of funding funds since May 2022.
“These policy changes have been massive and quick,” one executive said. “Now it’s another environment. We have never seen that. ”
