Goldman Sachs: Hedge Fund Returns Beat Broader Market in May, Leverage Hits Five-Year High
0xBroomberg
Goldman Sachs reports that stock-picking hedge funds returned 5.35% in May, beating the MSCI World's 4.55%; meanwhile, industry leverage rose to a five-year high — profits and borrowed bets are scaling up in tandem.
How much did hedge funds make in May?
Stock-picking hedge funds returned 5.35% in May; the MSCI World Total Return Index gained 4.55% — funds beat the benchmark by roughly 0.8 percentage points.
The S&P 500 rose for nine straight weeks, its longest winning streak since December 2023, buoyed by hopes of a geopolitical peace breakthrough.
This means → fund managers did not just ride the market up; active stock selection itself generated meaningful excess return in this rally.
Where did the money flow?
Hedge funds added positions at the fastest pace since June 2025, concentrating buys in IT, consumer discretionary, financials, and industrials.
Net selling hit energy, communication services, and consumer staples — capital rotated from defensive sectors into offensive ones.
Crowded long positions pushed prices higher, creating a momentum loop (rising prices attract more buying, which lifts prices further) → this widened short-term gains but also means reversal risk is elevated.
How did different strategies perform?
Systematic quant funds — those trading on algorithmic models — returned just 0.84% in May, far below the 5.35% of stock-pickers. In plain terms = this rally rewarded "picking the right stocks," not "riding the trend."
Some industrial-company positions dragged on quant returns.
Among large multi-strategy funds, Schonfeld posted 2.6% and Millennium posted 2.4%, both positive.
What does a five-year leverage high mean?
Goldman data show hedge-fund borrowing grew at one of the fastest rates in five years, pushing overall industry leverage to a five-year peak.
This means → funds are not just deploying their own capital; they are borrowing heavily to bet that the rally continues.
This reflects two things at once: institutions are deeply optimistic in the short term, yet high leverage amplifies losses if the market reverses — profit momentum and systemic risk are building in parallel.
Content is for reference only, not financial advice.