Hedge funds have built their largest short positions since 2023 on UK companies heavily exposed to the domestic economy, according to a Goldman Sachs client note.
The positioning shift comes just before Finance Minister Rachel Reeves’ budget, expected to include £35 billion in tax increases, which could pressure consumer demand and slow economic momentum.
🔻 Key Insights
- Since late October, hedge funds have aggressively sold UK-centric stocks.
- Long positions vs. short positions on UK domestic names have fallen to the lowest level since mid-2023.
- Even firms operating in Britain but selling globally saw net hedge fund selling in November.
- UK & European long/short funds are down ~3% in November, with losses in industrials, communications, and UK domestic names.
- YTD performance comparison:
- Europe-focused funds: +8.5%
- Asia-focused funds: +21%
- U.S. funds: +12%
🔍 Why It Matters
Higher taxes may boost government revenue but could slow domestic activity, making UK-focused equities vulnerable. This aligns with hedge funds’ shift into defensive short positioning amid macro uncertainty.