Hedge funds are nonetheless licking their wounds after a retail buying and selling frenzy compelled the trade to slash its general publicity to shares, resulting in an underperformance in 2021.

Final month, a military of retail traders who coordinated on social media managed to push GameStop shares up 400% in only one week, creating large squeezes in a slew of closely shorted names. Hedge funds getting burned on their brief positions scrambled to take down general danger and promote winners to boost money.

This kicked off a domino impact that led to hedge funds’ largest week of de-leveraging since February 2009, in keeping with knowledge from Goldman Sachs’ prime brokerage unit.

The mud has but to settle because the harm inflicted by the so-called dumb cash appears to be lasting. The 20 hottest lengthy positions amongst hedge funds have lagged the S&P 500 by greater than 1% yr up to now on common, in keeping with RBC’s evaluation of 330 hedge funds primarily based on the current regulatory…