Hedge funds have increased their short positions on European equities to over a decade-high, reflecting heightened investor concerns over economic growth, inflation, and geopolitical tensions that threaten the region’s recovery.
Hedge funds have deepened their bearish stance on European equities, pushing short positions to their highest level in more than a decade as investors grow more cautious about the region’s growth outlook, inflation risks and corporate earnings momentum.
According to data cited by Morgan Stanley and reported by Crypto Briefing, the shift has accelerated in recent weeks as managers respond to slower activity, geopolitical uncertainty and questions over how long interest rates will stay restrictive. The bank said hedge funds have been building short exposure in cyclical parts of the market, including industrials, consumer discretionary stocks and financials, while cutting their overall net exposure to Europe.
Separate data from Goldman Sachs Prime Services, as reported by European Business Magazine, suggests European macro shorts now account for 11% of hedge fund portfolios, marking the most sustained period of bearish positioning since April 2025. That account said the Iran war has added to pressure on the region through higher energy costs, more persistent inflation and weaker growth expectations.
The caution stands in contrast to the relatively resilient performance seen in some European benchmarks earlier this year. Even so, managers appear to be positioning for weaker earnings revisions and a bumpier stretch for markets, with macro funds and equity long-short strategies among the most active sellers, according to Morgan Stanley.
The sector split is also notable. European Business Magazine said hedge funds have been targeting consumer discretionary, technology and financials, while keeping long positions mainly in consumer staples and energy. Morgan Stanley’s data likewise pointed to selective interest in areas linked to artificial intelligence, defence and energy infrastructure, even as broader exposure was pared back.
The regional preference remains tilted away from Europe and towards the US, where hedge funds have generally expected stronger profit growth and greater exposure to large technology companies. At the same time, some recent Goldman Sachs commentary has pointed to tactical shifts into Europe as investors reduced US exposure, underscoring that positioning can move quickly as valuation gaps and macro concerns change.
For now, though, the dominant signal is one of caution. With inflation still unresolved, central bank policy uncertain and geopolitical tensions feeding into energy markets, hedge funds appear to be using short strategies both as a hedge and as a bet that Europe’s economic recovery will remain fragile.
- https://www.hedgeweek.com/hedge-funds-ramp-up-bearish-bets-on-european-equities-to-decade-high/ – Please view link – unable to able to access data
- https://europeanbusinessmagazine.com/europe-stocks-short-selling-record-2026/ – Hedge funds have increased short positions against European stocks to a 10-year high, according to Goldman Sachs Prime Services data. European macro shorts now account for 11% of overall hedge fund portfolios, marking the most sustained period of bearishness since April 2025. The primary driver is the Iran war and its impact on European energy costs, inflation, and growth. Sectors driving the selling include consumer discretionary, technology, and financials, while consumer staples and energy are the only areas where hedge funds maintained long positions.
- https://grafa.com/en/news/crypto/hedge-funds-record-short-global-equities – Hedge funds have ramped up bearish bets on global equities, posting their largest net short positioning in 13 years, according to Goldman Sachs data. Short sales outpaced long purchases by a ratio of 7.6 to 1, with around 76% of activity concentrated in index and ETF products. The positioning reflects deteriorating risk appetite amid rising geopolitical tensions and uncertainty across global markets. Gross leverage reached a record high while net leverage declined, indicating funds are increasing short exposure rather than reducing overall market participation.
- https://www.investing.com/news/economy-news/hedge-funds-bet-against-us-stocks-and-turn-to-europe-goldman-sachs-says-4574343 – Hedge funds have increased their short positions in United States equities and emerging Asian markets over the past week, while adding exposure to European stocks. A Goldman Sachs note shows that this strategic shift comes amid pressure across global markets. Global equity selling has reached its highest level since April 2025, with speculative investors recording net short positions for five consecutive weeks. The pressure stems from concerns over the Iran war, which is keeping oil prices elevated and fueling inflation.
- https://www.fxleaders.com/news/2026/04/04/hedge-funds-liquidate-global-equities-at-fastest-rate-in-13-years/ – Hedge funds sold international stocks in March at the fastest rate in 13 years, driven by increased short sales amid concerns over stock market weakness. The MSCI All-Country World Index experienced its worst monthly performance since 2022, dropping 7.4%, while the S&P 500 Index fell by 5.1%. Short positions in US ETFs rose by 17%, particularly in large-cap equity ETFs, indicating a bearish sentiment among investors. Despite the overall selling trend, hedge funds were net buyers of media, technology, and telecom stocks for the first time in four months, primarily to cover short positions.
- https://fazen.markets/en/hedge-funds-shift-to-europe-after-shorting-us-stocks – Hedge funds have materially rotated exposure away from the U.S. and toward European equities over the week ending March 20–23, 2026, according to a Goldman Sachs prime services note. The bank reported that hedge funds increased net short exposure to U.S. equities to approximately 3.2% of assets under management while raising European long exposure by 2.6 percentage points month-on-month. That repositioning coincides with a rise in regional dispersion and a relative valuation gap: European cyclicals and banks trade at an average 18% discount to U.S. peers on forward P/E as of March 20, 2026.
- https://hedgefundalpha.com/european-stock-short-positions/ – In late 2012, the EU began to require firms which held a short position in European stocks to disclose the position. The law now requires that firms with a short position equal to or over 0.5% of outstanding shares to publicly list it. The Short Selling Regulation (SSR), Regulation (EU) No 236/2012, introduces a notification and disclosure regime for investors who hold net short stock positions. Unsurprisingly, many large banks, hedge funds, asset managers in both the UK and the USA will appear on this list. All the various countries in the EU list on different sites and it is difficult at times to find the information.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
6
Notes:
The article references data from April 2025, which is over a year old. While it discusses recent trends up to April 2026, the reliance on outdated data raises concerns about the freshness of the information. Additionally, the article cites Crypto Briefing and European Business Magazine, which are not major news organisations, potentially affecting the freshness and reliability of the sources. The lack of more recent data or references to current events further diminishes the freshness score.
Quotes check
Score:
4
Notes:
The article includes direct quotes attributed to Morgan Stanley and Goldman Sachs. However, these quotes cannot be independently verified through the provided sources. Without access to the original reports or statements from these institutions, the authenticity of the quotes is uncertain. This lack of verifiable sources significantly lowers the score.
Source reliability
Score:
5
Notes:
The article cites Crypto Briefing and European Business Magazine, which are not major news organisations. These sources may lack the editorial standards and fact-checking processes of more established outlets, raising concerns about the reliability of the information presented. The absence of citations from reputable financial news sources further diminishes the source reliability score.
Plausibility check
Score:
7
Notes:
The article discusses hedge funds increasing short positions in European equities, a trend that aligns with known market behaviours during periods of economic uncertainty. However, the reliance on outdated data from April 2025 and unverified quotes from less reputable sources raises questions about the accuracy and timeliness of the information. The lack of corroboration from major news outlets further diminishes the plausibility score.
Overall assessment
Verdict (FAIL, OPEN, PASS): FAIL
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article presents information on hedge funds increasing short positions in European equities, citing data from April 2025 and unverified quotes from less reputable sources. The reliance on outdated data and the lack of independent verification from major news organisations raise significant concerns about the accuracy and reliability of the information. Given these issues, the content does not meet the necessary standards for publication.