1 August 2023
Hedge funds are scrambling as they face escalating risks amidst unpredictable markets in 2023. In response, these funds are rapidly cutting both bullish and bearish equity positions, in a frenzy akin to the 2021 retail-fomented short squeeze. The unexpected and relentless equity rally is causing broad capitulation, leaving funds floundering. Additionally, despite market optimism, looming uncertainties such as potential bond defaults and a weak market seasonality forecast for August are breeding an undercurrent of caution. Amid this chaos, long-short funds have posted nine consecutive days of negative returns, making the situation increasingly untenable.