APAC short sellers were down -$59 billion in year-to-date mark-to-market losses in 2025. This was a -21.4% YTD mark-to-market return versus the Vanguard FTSE Developed Asia Pacific All Cap Index ETF +29.2%.

Most short positions were unprofitable, with 72% of every dollar shorted being losers.

Every sector was unprofitable for short sellers in 2025.

Only thirteen out of seventy-seven industries were profitable on the short side. The most profitable industries, on a percentage basis, were Household Products, Diversified Consumer Services and Personal Care Products. The least profitable industries were Life Sciences Tools & Services, Metals & Mining and Electrical Equipment.

There was more short selling in larger cap names than smaller cap names, 85% of every dollar shorted was in Mega and Large and Mid-cap names. Larger hedge funds cannot trade in smaller cap names due to their large AUM’s and limitation on the number of securities they can effectively manage in their portfolios.

But even though most of the short exposure was in the larger cap stocks, short sellers were less unprofitable in smaller cap stocks.

There were no profitable APAC sectors on the short side. In dollar terms, Information Technology, Materials, and Industrials were the most unprofitable APAC equity sectors.

Looking into the industries within these sectors we see that Household Products (Unicharm Corp 8113 JP & Lion Corp 4912 JP), Diversified Consumer Services (IDP Education Ltd IEL AU & Tianli Intl Holding Ltd 1773 HK) and Personal Care Products (Giant Biogene Holding Co Ltd 2367 HK & Shiseido Co Ltd 4911 JP) were the most profitable Industries. While Life Sciences tools & Services (Wuxi Apptec Co Ltd 2359 HK & Wuxi Biologics Cayman Inc 2269 HK), Metals & Mining (Zijin Mining Group Co Ltd 2899 HK & China Hongqiao Group Ltd 1378 HK) and Electrical Equipment (Contemporary Amperex Technology Co Ltd 3750 HK & Fujikura Ltd 5803 JP) were the least profitable.

Interestingly, short-side profitability skewed toward the smaller cap names. Mega, Large and Mid-cap shorts were down -34%, 24% and -17% respectively, while Small-cap names were only down -12%. Micro-cap names were slightly unprofitable with a -2% YTD return, and Nano-cap names were down -13%. Short sellers had to be in the larger cap names due to the size of their short book and as hedges to long positions and took losses. But they were less unprofitable in their smaller cap names or “stock-picker shorts.”

Individually, in dollar terms the most profitable shorts in the market were:

Individually, in dollar terms the least profitable shorts in the market were:

In a rising market it is inevitable that the short side is a drag on a portfolio’s profitability. But it is unavoidable since a leveraged hedge fund portfolio requires both long-side and short-side bets. The more leverage a hedge fund requires, the larger the short book they need to build. The majority of these short positions are in larger cap names which act as a hedge to offset the general market risk of a portfolio, or its Beta, while a smaller portion of their short portfolio are their Alpha bets, those positions which hopefully add profitability to the bottom line.

With hedge fund leverage rising (short exposure increased from $165 billion to $243 billion in 2025) we are seeing more names being shorted in smaller caps which are potentially outsized Alpha generators. Using additional factors in short-side stock selection can differentiate a portfolio from the herd and make a fund more attractive (less risk – more return). Using S3’s short-side analytics adds new factors and data points to create a less risky higher return portfolio.

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.