Hedge funds substantially reduced their equity exposure in March, selling global stocks at the quickest pace observed in 13 years, based on data compiled by the prime brokerage arm of Goldman Sachs Group Inc. The level of selling logged was the second-largest since the bank began tracking the series in 2011.
The acceleration in sales was driven in large part by an increase in short selling, a pattern that the prime-broker data links to concerns about further weakness in the stock market as fighting continues in Iran. Over the month, the MSCI All-Country World Index fell 7.4%, marking its worst monthly drop since 2022, while the S&P 500 Index declined 5.1% during the same period.
Fast-money managers leaned on exchange-traded funds to position for a deteriorating market backdrop. Short positions in large-cap equity ETFs were an important component of activity, contributing to a 17% rise in short positions across US ETFs overall.
In the United States, hedge fund selling extended across multiple sectors. Eight of the 11 GICS industries recorded net outflows, with the most pronounced selling pressure concentrated in industrials, materials and financials - sectors that are closely tied to economic activity.
At the same time, fund managers moved toward defensive holdings. Purchases of consumer staples stocks occurred at the fastest rate since July 2025, and that buying was entirely driven by long positions rather than short covering. Separately, hedge funds were net buyers of technology, media and telecom (TMT) equities for the first time in four months; however, that net buying was driven by short covering rather than the establishment of fresh long exposure.
The data reflect an active repositioning by hedge funds across both directional and ETF strategies during a month of heightened market volatility and geopolitical concerns. The patterns show simultaneous reduction of cyclical risk exposure, increased use of short ETF positions, and selective defensive buying among long-only allocations.
Context and market signals
The dynamics in March combined a notable rise in short interest via ETFs with broad sector-level selling. Industrials, materials and financials experienced the heaviest net outflows, while consumer staples saw the fastest accumulation of long positions in nearly two years. Technology, media and telecom saw net purchases driven primarily by the covering of prior short positions.