NEW YORK, Aug 12 Reuters Portfolio managers at hedge funds have retrenched from some of their riskier positions after a volatile week for markets.

A brutal selloff and recovery in global markets in the past week was triggered by the unwinding of billions of dollars worth of yenfunded trades and worries the U.S. economy was heading to a recession. The CBOE Volatility Index ended at its highest close in nearly four years on Aug. 5.

The market rout has been painful for a number of hedge funds. Global macro quantitative funds posted losses between 1.5 and 2.5 between Aug. 1 and Aug. 5., while hedge funds focused on the technology sector posted losses between 2.5 and 3.5, according to hedge fund research firm PivotalPath39;s exposure model.

We did see some degree of deleveraging, said Edoardo Rulli, chief investment officer at UBS Hedge Fund Solutions, which invests in hedge funds. Not panicking, but portfolio managers reducing positions.

An unexpected spike in volatility is likely to suppress risk appetite until investors are more comfortable about global growth prospects, according to Sophia Drossos, economist and strategist at Point72 Asset Management.

When you have a very longterm trade that starts to unwind very abruptly, it does hurt risk appetite. We39;ll probably see an environment where investors remain reticent or skittish about taking on too much risk again, she said. It could be a headwind for the rest of the summer. Drossos39; views do not necessarily…