NEW YORK, June 3 (Reuters) - Global hedge funds dumped

equities last week, in a painful week for their portfolios as

the U.S. main indexes fell and hit their long bets, Morgan

Stanley ( MS ) said in a note.

The bank described last week as "ultimately one of the more

challenging we have seen in recent months for the average L/S

fund," or long/short fund, based on what they saw in their

clients' portfolio. The pain was mostly concentrated on the

funds' long positions, or bets that a certain stock will rise.

As one of the world's biggest prime brokerages, Morgan

Stanley ( MS ) is able to track trends in equities flows and

performances. Prime brokers provide services to hedge funds,

such as leverage and trading.

Last week, the S&P 500 fell 0.48%, while the Nasdaq

and the Dow Jones declined 1.1% and 0.93% after

some tech companies, such as Dell Technologies ( DELL ) and

Salesforce ( CRM ), disappointed. In addition, some data showed

the economy had grown more slowly than previously expected in

the first quarter while jobless claims rose a little more than

expected.

Morgan Stanley ( MS ) said hedge funds net sold stocks across all

regions, but mainly in North America, where the selling was

concentrated in the technology, media and telecommunication

sector and included big names.

"Mega-cap names drove an outsized portion of this flow as

hedge funds reduced long exposure while simultaneously adding to

shorts," the note mentioned.

Hedge funds also added short trades, when hedge funds bet a

share will fall, across Europe and Asia, including Japan.

Americas-based long/short funds performance declined 0.9%

for the week ended on May 30, versus 1.3% for the S&P. In the

month through May 30, they gained 1.4% while the index rose

4.1%, capturing only 35% of the S&P gains in the month,

according to Morgan Stanley ( MS ).