Hedge funds are deploying near-record leverage as they chase higher returns in markets lifted by the AI boom — raising both opportunity and risk.
⚡ Leverage Near All-Time Highs
Major prime brokers report unprecedented levels:
- Goldman Sachs: Global gross leverage at 285.2%, meaning $100 of capital supports ~$300 in positions.
- JPMorgan: Leverage at 297.9%, the highest in 5 years.
- Quant & multi-strategy funds: 645.3% and 444.3% leverage on average.
- Morgan Stanley: U.S. hedge funds operating at >2× leverage, higher than 99% of the last 15 years.
Some hedge funds report being offered 10× leverage, near historical highs.
🚀 Why It’s Happening
Hedge funds remain bullish despite AI bubble concerns:
- S&P 500 +16.1% YTD
- Nasdaq 100 +21.6% YTD
AI enthusiasm continues to fuel trading volumes and aggressive positioning.
⚠️ Rising Regulatory Scrutiny
Regulators — including the Federal Reserve and BIS — warn that elevated leverage amplifies both gains and losses.
A synchronized unwind could trigger sharp market dislocations, especially among multi-strategy “pod shops” that now account for one-third of equity gross exposure (up from $91B in 2010 to $428B in 2025).
🛡️ Risk Management Still Strong
Despite concerns, many industry experts note that leading multi-strategy funds have robust risk controls, and results remain solid:
- Global hedge fund returns: ~11% YTD (Morgan Stanley)
As John Schlegel of JPMorgan puts it:
“Clients have become better at monitoring and hedging risks as the industry evolves.”