Hedge funds gain little from rally sparked by US-China trade deal

By Carolina Mandl

NEW YORK, May 13 (Reuters) – Global hedge funds reaped limited gains from a big Wall Street stock rally triggered by a U.S.–China agreement on tariffs on Monday, a Morgan Stanley note on Tuesday showed.

Hedge funds rose 0.60% on average on Monday, underperforming the S&P 500 index .SPX, which advanced 3.23% and closed at its highest level since March 26.

Morgan Stanley said global portfolios are less invested in the United States than in the last two years, as hedge funds and other investors shifted funds to other regions after U.S. President Donald Trump started a global trade war that shocked financial markets.

As Trump’s erratic tariff announcements created uncertainty, hedge funds have also become more bearish in recent months and have placed more short positions, or bets that stocks would fall, the bank said.

Hedge funds were the most bearish in five years last week and had to cover shorts during the rally, Morgan Stanley said.

Hedge funds gained little from Monday’s surge in technology and artificial intelligence stock prices due to their reduced exposure to the sectors, the bank said.

Year-to-date through May 12, global hedge funds are on average up 2.12%, while the S&P was down 0.69%.

(Reporting by Carolina Mandl in New York; Editing by Richard Chang)

((carolina.mandl@thomsonreuters.com; +1 (917) 891-4931))