Hedge funds slashed their borrowings at the start of this year amid credit crunch worries but remained geared ahead of the rout of the sector in the autumn, according to figures from the UK’s Financial Services Authority. The half of the hedge fund industry covered by the FSA’s biannual survey of hedge funds serviced by prime brokers in London cut borrowings from $754bn in October last year, when they were 1.92 times geared, to $375bn, or 1.45 times, by April, the data show. Since then the industry has cut its leverage to virtually nothing as wild market swings left funds nursing the biggest losses on record, prime brokers say. However, it could be good news for stock markets - battered by hedge funds deleveraging, selling shares to pay off debt - as it suggests there is little more to come. Research by Goldman Sachs last week estimated that hedge funds owned 3.5% of US equities at the end of September, down from 4.5% in June.
