- The giants keep getting bigger. The 10 largest multistrategy hedge funds, which research firm PivotalPath did not identify, oversaw $2.2 trillion including borrowed money at the end of 2025, more than triple the amount in 2018, Bloomberg reported.
- Leverage is high. That level of borrowing is about six times their combined net assets of $360 billion, PivotalPath estimated. The six multimanager funds in the group, which use multiple trading pods, had the highest leverage, ramping up their net capital by eight to 14 times.
- Their bets look more alike. The 10 firms’ US stock holdings overlapped more with one another than with other hedge funds, and since 2019 their returns have become more correlated with one another than with funds outside the group.
- The firm stressed it is not a forecast. “These findings do not predict stress,” PivotalPath said, but a shock hitting these managers together “would meet high leverage, overlapping positions” and could make it hard for managers with shorter lockups to meet redemption requests.
What Happened?
PivotalPath’s report examined the size, leverage and positioning of the industry’s largest multistrategy funds, the pod-based platforms that have come to dominate hedge fund assets. It found that their growth has been accompanied by heavy use of borrowed money and increasingly similar portfolios. Most of the industry’s biggest firms have lockups that extend several years, a way to avoid forced selling. A representative for PivotalPath declined to comment beyond the report.
Why It Matters?
Crowding is a risk for the broader stock market, not just hedge fund investors. When large, leveraged players hold the same positions, a shock that forces one to cut risk can trigger selling by the others, amplifying moves in the stocks they own. Rising correlation among these funds also undercuts their pitch as diversifiers for pensions and endowments. Long lockups reduce the chance of a run, but they do not stop managers from cutting positions quickly when losses mount.
What’s Next?
Watch for signs of stress in crowded hedge fund positions, especially during sharp market swings, and for any move by large funds to reduce leverage. Investors and regulators may press for more disclosure about overlapping positions, and allocators may scrutinize lockup terms more closely when committing to the largest platforms.
Affected Tickers and Coins: SPY, QQQ
Source: Bloomberg
