Hedge Funds are Moving Out of Equities, So Should You

Hedge Funds are Moving Out of Equities, So Should You

Hedge Funds are Moving Out of Equities, So Should You

If you are overly exposed to US equities it is time to rethink your position.

The smart money is leaving the table and we suggest you do the same or at the very least build a hedge (we are happy to help you do that).

For now go defensive in a globally diversified hedged portfolio.

S&P Global Market Intelligence, a leading provider of multi-asset class research data and insights, today released its review of Q2 2016 13F filings by pure play hedge funds. The quarterly S&P Global Market Intelligence Hedge Fund Tracker is an aggregate analysis of hedge fund equity ownership that highlights hedge fund investments in specific stocks and sectors.

The latest Hedge Fund Tracker analysis shows the top funds managed approximately $150 billion in equity holdings, up from the $141 billion under management in Q1. These funds also decreased the number of positions to 399 in Q2 from 408 in Q1, breaking last quarter’s record as the fewest stock positions held since S&P Global Market Intelligence began tracking this data in 2014. Information technology and healthcare sectors were the biggest net sells for the top ten hedge funds.

“Like other market participants, hedge funds were at the whim of the broader market and economy these last few months,” said Pavle Sabic, Head of Market Development, S&P Global Market Intelligence. “In the first quarter, we saw substantial net selling of nine out of ten S&P 500 sectors. Confidence improved somewhat in the second quarter, but only up to a point. We understand what the ‘smart money’ is buying and selling, but there’s no sense of direction.”

Following is a summary of findings in the Q2 2016 Hedge Fund Tracker:

Increase in AUM, Decrease in Positions: Top hedge funds now manage $150 billion, up from $141 billion in Q1, but still down from the $159 billion seen in Q4 2015. Part of this might be due to a market correction, but the number of positions decreased to 399 in Q2 from 408 in Q1, on top of a decline from Q4 2015’s 427 positions.

Slightly More Confidence but Nothing to Celebrate: Compared to Q1’s selling of 9/10 sectors, things are a little better as 6/10 sectors are net buys in Q2. Consumer discretionary (+$1.5 billion) and energy (+$1.2 billion) lead the way.

The Dark Horse Returns: With consumer discretionary being the most bought sector in Q2, one stock stands out: Charter Communications with ($1.2 billion) in buys. Four out of the top 10 hedge funds bought shares of this consumer discretionary cables services company, in which three of the four hedge funds established new positions.

Five Biggest Buys: Besides Charter Communications, the top funds bought Morgan Stanley ($993 million), Adidas ($921 million), Allergan ($841 million), and Shire ($821 million)

Five Biggest Sells: Like in Q1 2016, Apple stock was the most sold off amongst the biggest hedge funds with $5.3 billion of its stock shed. Next came Netflix ($1.9 billion), Allergan ($1.5 billion), Microsoft ($1.4 billion), and Alphabet ($761 billion)

Apple Not In Favor: To put hedge funds shedding $5.3 billion of Apple in perspective, info tech as a whole saw net sell offs of $6.3 billion. That’s about 84%. This could be due to hedge funds trying to lock in gains for their investors as Apple had a rally in the last few months

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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