Hedge funds resume shorting after biggest squeeze since 2020, shifting to market-neutral bets

Hedge funds are resuming shorting just weeks after suffering the biggest short squeeze since the March 2020 rebound. In March 2026, Goldman Sachs prime brokerage data showed short sales outpaced long buys by a 7.6-to-1 ratio globally—the fastest net selling pace in 13 years. About 76% of those shorts were concentrated in major stock indexes and ETFs, turning the trade into a broad “bet against the market,” which made the unwind swift and painful. The squeeze followed a major risk-relief catalyst: on April 8, President Trump announced a temporary ceasefire in the US-Iran conflict, and equities rallied sharply. Hedge funds scrambled to cover, with the short-covering pace the fastest since March 2020. Macro short exposure reportedly peaked at 12% of total gross exposure before the unwind, the highest since the pandemic. By late April and early May, hedge funds recalibrated their approach. Rather than adding more broad index shorts (as in March), hedge funds appear to be rebuilding bearish exposure more surgically: market-neutral positioning first, plus selective single-stock shorts and relative-value trades. Multi-strategy funds—including Citadel, Schonfeld, and ExodusPoint—reportedly navigated the turbulence better through faster repositioning. For traders, the key takeaway is that hedge funds are hedge-driven shorting again—but with tighter risk controls and less crowding into index-level bets, which could mean choppier but more managed volatility ahead.