Goldman Sachs reports that hedge funds significantly increased their short positions in US-listed ETFs across various asset classes last month, marking the largest rise in nearly four years. According to Vincent Lin, co-head of Goldman Sachs Prime Insights & Analytics, short flows in US-listed ETFs surged by 14.6%, the highest monthly increase since February 2021.
While macro products like indices and ETFs saw net buying in the first half of the month, selling activities intensified towards the end of the year. The most heavily shorted market segments included large-cap stocks, small-cap stocks, healthcare, and corporate bond ETFs.
Overall, hedge funds were net buyers of global equities in December, with both long buying and short selling flows being notably high. The U.S. market's post-election boom faded, and the record-setting rally of 2024 stalled in the final month. The S&P 500 had its third-worst December performance in the past two decades, with more declining than advancing stocks on about 70% of the trading days.
