Overall hedge-fund exposure to U.S. equities sits at the lows for the year, according to data compiled by Nomura Holdings Inc.
There’s another, perhaps more ominous, explanation. Rather than a tactical decision to reduce exposure, redemptions and closures in the $3 trillion market may be to blame for the unwind in bearish positions, said Pierson.
As ever, shifts in market structure are also playing a role.
Traders are using options and more liquid exchange-traded funds to express bearish views, often at the expense of single-stock trades. Even so, they’ve delevered across the board -- and it would require a big catalyst like a growth scare to up downside wagers right now, according to Martin at Deutsche.
“Nobody wants to put on a big single-stock short and have the holiday market rip and hurt their returns,” she said.
This article was provided by Bloomberg News.