Hedge funds cut energy, bank stocks amid sharp stock sell-off

Hedge funds sold the largest number of stocks in more than six months last week, including energy stocks, according to a client note from Goldman Sachs, while a separate note from JPMorgan highlighted a sell-off in banks.

Speculators mainly sold global banks and financial services companies into the US, leaving their positioning in the sector neutral. This emerged from a client note from JPMorgan’s prime brokerage, which was seen by Reuters on Monday.

This came against the backdrop of global equity sell-offs late last week, with the bankruptcies of First Brands and Tricolor highlighting banks’ risk management and the opaque credit market, where complex lending and new facilities have made it harder to gauge participants’ exposure.

Still, the S&P 500 index ended last week 1.7% higher as quarterly results from regional banks eased concerns in the banking sector and investors took comfort from US President Donald Trump’s latest comments on trade ties with China.

Retail and mutual funds accounted for more than half of U.S. stock market volume in the first quarter of 2025, while hedge funds accounted for less than 10%, a UBS client note showed in August.

Hedge funds sold shares in all major trading regions except Europe last week by the largest amount in six months, according to a prime brokerage note from Goldman Sachs seen by Reuters on Monday. Hedge funds dumped losing long positions and added short bets, the bank said. A long position bets that the value of an asset will rise, while a short bet expects it to fall.

The Goldman note added that energy stocks sold off at the biggest clip in four months.

Crude oil fell below $60 last week following a report from the International Energy Agency, which still expects a significant supply glut in the oil market.

Hedge fund sales were concentrated in companies related to the oil, gas and consumable fuel industries, Goldman said.

However, uncertainty about where oil supplies currently lie in the world and disputed supply forecasts from other oil forecasters, including OPEC, have called this forecast into question.

Exposure to energy-related stocks from hedge funds, followed by Goldman Sachs’ prime brokerage, is now the lowest in three years, Goldman said.

Overall stock selection performance fell 0.73% between October 10 and 16. Those with systematic strategies saw returns rise 0.22% over the same period, Goldman’s note said.