Hedge fund leverage lifts banks' nine-month equities revenue to $67bn

The five largest US investment banks booked $67 billion of equities revenue in the first nine months of 2026, roughly $7 billion more than last year's full-year record, according to Hedgeweek, which cited a Daily Upside report drawing on CNBC analysis. Goldman Sachs, Morgan Stanley and JPMorgan Chase accounted for $52 billion of that total, or nearly 80%.

Goldman Sachs led the group with more than $19 billion, up 57% year on year, followed by Morgan Stanley at about $17 billion and JPMorgan at $15 billion. Hedgeweek attributes the surge to hedge funds' growing appetite for leverage, partly in service of AI bets, which lifted prime brokerage activity and was supported by looser bank leverage requirements. Goldman Sachs reported a 96% increase in equities financing revenue in the third quarter, and JPMorgan CFO Jeremy Barnum described exceptionally strong demand for capital on the bank's earnings call, according to the report.

An allocator sizing up a hedge fund now has a fresh reason to ask about gross leverage, its prime brokers and the terms of its financing. Bank revenue from equities financing is one public measure of how much leverage is being pulled into hedge fund books, and it is running at a record while the clients themselves trim risk.

Hedgeweek reported the IMF puts hedge fund assets at $13 trillion, up from $4 trillion in 2013, with leverage driving much of the increase and the potential to amplify market volatility during periods of stress.

July's semiconductor selloff was a test of that structure. The collapse of hedge fund Situational Awareness came when losses on heavily leveraged AI trades forced the fund to unwind its positions, according to the report. Those losses were largely absorbed by hedge funds rather than their financing banks, Hedgeweek reported, though it added that a broader correction in AI-related equities could put further pressure on leveraged portfolios and increase risk across the prime brokerage market.

Goldman Sachs said hedge funds sold technology stocks last week at the fastest pace in at least a decade, and net leverage among its hedge fund clients fell to a one-year low. Technology still accounted for nearly a quarter of their holdings as of Oct. 15.