Hedge funds that hunkered down after GameStop are now missing out on market gains

Hedge funds are still licking their wounds after a retail trading frenzy forced the industry to slash its overall exposure to stocks, leading to an underperformance in 2021.

Last month, an army of retail investors who coordinated on social media managed to push GameStop shares up 400% in just one week, creating massive squeezes in a slew of heavily shorted names. Hedge funds getting burned on their short positions scrambled to take down overall risk and sell winners to raise cash.

This kicked off a domino effect that led to hedge funds’ largest week of de-leveraging since February 2009, according to data from Goldman Sachs’ prime brokerage…