Large multistrategy hedge funds are increasingly exposed to overlapping investments and elevated leverage, raising concerns that a market shock could trigger widespread losses and forced selling across the sector, according to research from PivotalPath.

The ten major multistrategy firms examined in the study managed approximately $2.2tn in gross assets, including borrowed capital, at the end of 2025, more than triple their exposure in 2018. Their combined net assets stood at $360bn, implying leverage of approximately six times investor capital.

Leverage was particularly pronounced among the six multimanager platforms operating multiple investment pods, which employed leverage of between eight and 14 times their net capital, according to PivotalPath.

The research also found increasing similarities in investment positioning, with the US equity holdings of the ten largest multistrategy firms overlapping more heavily with one another than with those of other hedge funds. Returns across the group have also become more correlated since 2019, suggesting greater exposure to common market risks.

PivotalPath warned that a simultaneous market shock affecting highly leveraged managers with concentrated positions could amplify selling pressure and create liquidity challenges, particularly for funds offering shorter investor redemption periods.

While the findings do not indicate an imminent market disruption, they highlight growing concerns over systemic vulnerabilities within the multistrategy hedge fund sector, even as larger platforms increasingly rely on multi-year investor lockups to mitigate liquidity risks.