By Nell Mackenzie
LONDON (Reuters) – Hedge funds focused on European stock markets suffered their biggest monthly losses in more than a year in October, dragged down by a broader market sell-off, according to a note from Goldman Sachs sent to clients on Friday and seen by Reuters on Monday seen.
European stock picks returned a negative 2.6% in October, the biggest monthly loss since September 2023, according to Goldman Sachs.
The region’s broadest index of European shares fell 3.6% in October during the third-quarter earnings season, with positive results from banks, pharmaceuticals and biotech companies offset by a setback from industrials and energy companies.
European shares were sold off broadly by all market participants as global traders dumped their European holdings in favor of hoovering up US stocks ahead of the presidential election, the note said.
Falling stock prices in Europe have pushed returns for European traders down to 5% this year, less than half the 11.5% recorded by U.S. stock pickers.
Losses were mainly driven by utility stocks such as gas, electricity and water companies, Goldman said.
Industrial stocks and short positions, which bet on a decline in the value of a company’s shares, made money for some hedge funds, it added.
Stocks that saw the largest net turnover came from hardware technology companies such as semiconductor and semiconductor equipment companies, as well as the aerospace and defense sectors, the bank said.
Financial stocks, which typically include banks, were the most net-bought sector for the second month in a row, with hedge funds dropping short positions and adding long positions betting on a rise in value, Goldman said, without providing a further breakdown.
European-focused fundamental stock selections “substantially” reduced gross leverage in October, the bank said, while net leverage hit a year-to-date low.
(Reporting by Nell Mackenzie; Editing by Kirsten Donovan)
