(HedgeCo.Net) The hedge-fund industry is leaning harder than ever into borrowed money — and the timing could not be more striking. According to recent data from major prime brokerages Goldman Sachs, JPMorgan, and Morgan Stanley, funds are now operating with gross leverage — the ratio of trading positions to investor capital — hovering near record-high levels. Investing.com+2Finimize+2

As of end of November 2025, JPMorgan’s data show a gross leverage of 297.9%, while some quant and multi-strategy funds are reportedly pushing as high as 645% and 444%, respectively. Investing.com+1 On average, for every $100 of actual investor money, funds are holding roughly $300 in combined long and short positions. Investing.com+1

Why now? The AI-led rally in equities — especially in technology and related sectors — has given hedge funds the confidence to borrow heavily, aiming to amplify gains. As one prime brokerage executive quoted in Reuters put it: “Markets have gone up pretty materially … much faster than hedge fund AUM.” Investing.com+1

But with great leverage comes great risk. While the gains have been compelling so far — many funds are posting double-digit returns this year — regulators and market watchers are voicing concern. A broad, synchronized unwinding of leveraged positions could destabilize markets. Experts warn that if multiple funds try to exit crowded trades at once, liquidity could evaporate, triggering sharp price swings. Investing.com+2Bloomberg+2

Indeed, the surge in leverage underscores a broader tension in hedge-fund strategy: balancing the lure of AI-fueled market gains with the danger of overextension. As many funds pile on leverage, 2026 could see the industry tested if market sentiment shifts — or if a macroeconomic shock hits.