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Hedge funds turn bullish as their equity exposure is the largest since April 2023

Published 07/11/2024, 06:33 AM
Updated 07/11/2024, 06:37 AM
© Reuters.  Hedge funds turn bullish as their equity exposure is the largest since April 2023
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Hedge funds are turning bullish, with their net long exposure surging to 228% at the end of April 2024, up from 168% in the month prior.

According to Jefferies analysts, this marks the highest long exposure since April 2023.

“To accomplish this, they also raised their net short position to -128% vs. -0.68% one month prior,” analysts noted.

Jefferies also highlighted a marked increase in exposure to secular growth sectors, particularly technology and healthcare.

"Hedge funds sharply increased their exposure to Health Care with the weight at 21.1% from 15.1% one month ago. Tech's weight was bumped up to 29.7% from 27.1%," the report noted.

Moreover, hedge funds have reduced their positions in bond proxies, sectors traditionally seen as safer but with lower growth potential, with Staples going down from 2.9% to net short -1.4%. Utilities fell from 1.4% to -0.14% and Real Estate slid to -0.5% from -0.3%.

The S&P 500 continued its upward trajectory in June, but not all tracked portfolios matched its performance, Jefferies said.

The Most Popular Longs and Uber Crowded portfolios outperformed the S&P 500, with year-to-date gains of 24.7% and 28.9%, respectively. In contrast, portfolios focusing on short positions underperformed; the Popular Shorts portfolio gained just 1.8% YTD, while stocks transitioning from Long to Short rose by 0.8%. Also, the Short to Long portfolio posted weak results in June, showing a modest 0.5% increase for the year so far, the investment bank noted.

It also observed a noteworthy shift in the weight of their "Sweet 16" portfolio, which tracks key high-growth stocks.

"Despite getting 'Growthier,' investors lowered the Sweet 16 weight to 39.5% from 41.7% at the end of April," analysts noted. “However, our Sweet 16 represented 33.7% of the S&P 500; thus, these investors are OW the group by 5.8%.”

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