Published by Global Banking & Finance Review®
Posted on September 22, 2025
2 min readLast updated: January 21, 2026
Add as preferred source on GoogleHedge funds are accelerating investments in banks and consumer finance, with significant activity in Europe and North America, amid regulatory changes.
By Nell Mackenzie
LONDON (Reuters) -Hedge funds bought banks, insurance and consumer finance companies last week at the fastest pace in three months, Goldman Sachs said in a research note, amid increased dealmaking expected to boost profits and an expected further loosening of regulations.
An index of European banks has risen over 40% so far this year, while U.S. banks have advanced just over 20%.
The funds picked no regional favourite, but North America and Europe took the bulk of long positions, betting that shares in these markets would rise, according to the Goldman Sachs note to clients on Friday that was seen by Reuters on Monday.
Hedge funds, which had throughout August decreased trading levels, raised gross leverage levels last week by the largest amount in eight months, the Goldman Sachs note said.
Gross leverage is a gauge of how much hedge funds are trading.
Financial companies were the second most bought sector monitored by Goldman Sachs' prime brokerage unit, followed by tech stocks.
"We were hopeful at the start of the year that pragmatism on the part of regulators and government would underpin a better year for the specialist lenders, both operationally and in terms of share prices. So far, so good," said a September 17 report by analysts at the UK bank, Panmure Liberum.
Banks generally tend to make money in times of higher interest rates, but the prospect of lower interest rates was already baked into stock prices, its note said.
The Fed last week cut rates for the first time since December and signalled further reductions at its October and December meetings given signs of a weakening U.S. labour market.
Goldman Sachs CEO, David Solomon, said in a CNBC interview earlier this month that the bank expected its busiest week for initial public offerings since July 2021.
(Reporting by Nell Mackenzie; editing by Dhara Ranasinghe and Jane Merriman)
A hedge fund is an investment fund that employs various strategies to earn active returns for its investors, often using leverage and derivatives.
Consumer finance refers to financial services that cater to individual consumers, including loans, credit cards, and mortgages.
Interest rates are the cost of borrowing money, expressed as a percentage of the loan amount, typically charged annually.
Gross leverage is a measure of how much capital a hedge fund is using to invest relative to its equity, indicating the level of risk taken.
Investment leverage involves using borrowed funds to increase the potential return on investment, but it also increases risk.
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