Hedge funds were struck by a short squeeze at the end of the third quarter, which stretched into mid-October. However, they’re back on a steady pace as that squeeze quickly unwound. Interestingly, short interest in small caps in the Russell 2000 is double the percentage of short interest in S&P 500 names.
According to Goldman Sachs’ third-quarter “Hedge Fund Trend Monitor” report, hedge funds are up 12% year to date through Nov. 19 — even though their short positions displayed significant volatility recently.
Also see: 13F Q3 2025 Hedge Fund Update: Key Changes For Top Funds
The firm’s report shows that its basket of Very Important Positions (VJP) rose 21% year to date, beating the equal-weight S&P 500’s return of 7% and a basket of the most concentrated shorts, which returned 15%.
Short squeeze has already unwound
Goldman’s short basket squeezed by 36% in September and early October, although more recently, it has plummeted 26%.
Although short squeezes frequently lead to drawdowns in popular long positions, Goldman’s VIP basket surged more than 10% during the September squeeze, now trading 5% below its October high.
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