Goldman's Q1 Review: Hedge and Mutual Fund Activity
Goldman Sachs has released two of its most anticipated periodic reports: the Hedge Fund Trend Monitor and Mutual Fundamentals. These reports provide a detailed analysis of the quarterly activities and flows of hedge and mutual funds. Here are the key takeaways from each report.
Hedge Fund Trend Monitor
Performance
US equity long/short hedge funds have posted a robust +8% return year-to-date (YTD). The impressive performance of popular long positions in hedge funds has contributed to these returns, despite a recent short squeeze in popular shorted stocks. Goldman's list of the most popular long positions has returned +16% YTD, outperforming both the S&P 500 (+12%) and the equal-weight S&P 500 (+7%).
Leverage and Short Interest
Hedge funds have slightly increased net leverage in line with the broader market rally, while maintaining record gross leverage. Concentrated short positions have recently been highly volatile, prompting funds to shift out of their preferred long positions to cover shorts. However, the most recent short squeeze was less severe than those experienced in 2021 and December 2023.
Hedge Fund VIPs
Mega-cap stocks remain the most popular long positions for hedge funds. Amazon, Microsoft, Meta, Google, and Nvidia continue to rank as the top five stocks in the VIP list this quarter, with Apple joining the top six.
Mega-Caps and Artificial Intelligence
Hedge funds have reduced positions in mega-caps while increasing positions in broader AI beneficiaries. Apple was the exception, with hedge funds incrementally adding to their positions.
Sectors
Hedge funds have continued to shift towards cyclicals, with widespread increases across Consumer Discretionary, Financials, and Energy sectors.
Mutual Fundamentals
Performance
Mutual funds have delivered strong results YTD, with 45% of large-cap mutual funds outperforming their benchmarks, compared to the historical average of 38%.
Themes in Focus
The average large-cap mutual fund was underweight in mega-cap tech stocks in Q1 2024. In contrast, mutual funds increased their exposure to Utilities to a new 10-year high.
Sectors
The average large-cap mutual fund is currently most overweight in Financials and Industrials and most underweight in Info Tech.
Stocks
Goldman has rebalanced its Mutual Fund Overweight and Mutual Fund Underweight baskets in this report.
Final Thoughts
This comprehensive overview of hedge and mutual fund activity in Q1 provides valuable insights into the current state of the market. It's interesting to see the shift towards cyclicals in hedge funds and the increased exposure to Utilities in mutual funds. What are your thoughts on these trends? Do you think they will continue in the coming quarters? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
