Hedge funds unwound single-stock positions at the fastest pace in more than two years on Friday, with de-risking activity reminiscent of March 2020, when portfolio managers slashed market exposure amid the onset of the Covid-19 pandemic, according to a report by Reuters.

The report cites a note from the prime brokerage division at Goldman Sachs as highlighting that US stock markets plunged on Monday, with the Nasdaq Composite Index (.IXIC) dropping 4%, as investors worried that President Donald Trump’s tariff policies could push the U.S. economy into recession.

Goldman Sachs detailed that hedge funds’ single-stock sales were the largest in over two years, adding that some hedge funds' de-risking efforts in concentrated trades mirrored those seen in March 2020. The note also drew comparisons to January 2021, when hedge funds scrambled to cover short positions in heavily shorted meme stocks favoured by retail traders.

According to a separate Goldman Sachs report though, hedge fund equity leverage remains high indicated at 2.9 times their books – the highest level in the past five years – amplifying risk.

Some investors told Reuters they were concerned that highly leveraged hedge funds could be forced to further de-risk, potentially delaying a market rebound.

Hedge funds trimmed both long and short positions, particularly in crowded trades, where many investors held similar bets.

Goldman Sachs observed a “risk-off” shift across 10 of 11 global sectors, with industrials seeing the sharpest pullback. The trend was most pronounced in the U.S. but extended across global markets.

By Monday morning, before the sell-off deepened, equities long-short hedge funds were already down 1.5%, while systematic managers had lost 0.3%, according to Goldman Sachs.