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Hedge fund leverage soars and it is not just pod shops...
Hedge fund industry borrowing hit record levels by the end of the first quarter of 2025: an 11% increase over the quarter and a 26% increase year on year. The key driver of the quarterly growth in terms of types of borrowing was repo financing which grew 14% over the quarter following a contraction in the prior quarter. Both prime brokerage and repo borrowing are at record levels.
Where gross leverage has risen more sharply recently are macro and equity long/short hedge funds. Macro is particularly interesting as here net leverage has also increased ahead of the other hedge fund strategies. The stellar returns of many of the largest and most leveraged macro hedge funds are a complete contrast to the dire returns of quant trend-followers.