Hedge funds hold record exposure to the seven biggest tech stocks by market capitalization, according to data released on Friday by Goldman Sachs, as managers resumed buying into the sector this month.
The largest seven U.S. stocks collectively now make up about 20% of the total net market value held by hedge funds tracked by Goldman Sachs. They have also been instrumental in the gains in the broader U.S. equity market this year.
Microsoft , Apple, Alphabet, Meta, Amazon, Nvidia and Tesla saw the biggest percent of single stock exposure as of August 24, meaning the positions were trades in the individual stocks, not just in the indices like the Nasdaq.
The companies did not immediately respond to a request for comment.
“We essentially have had two markets: the ‘Magnificent Seven‘ and all the rest of equities. Hedge funds will be forced into capturing these returns regardless of analysis,” Jim Neumann, chief investment officer of Sussex Partners, said.
“It is momentum on steroids,” he said, adding that stock-picking hedge funds might find it harder to outperform investments in other asset classes, like fixed income.
Goldman Sachs, which runs one of Wall Street’s largest prime brokerages, is able to track trends in flows.
Shares in these companies have all risen over 35% this year with performances ranging from Apple’s positive 38% to Nvidia’s 211%.
“The primary objective of hedge funds is to generate returns, rather than to be imaginative for the sake of diversification,” said Bruno Schneller, a managing director at INVICO Asset Management.
Given the stocks’ outperformance, it makes sense to have invested in them, Schneller said.
Daniel Loeb, who runs Third Point – which had around $12.6 billion in assets under management at end-February – said earlier in August that his top five winners in 2023 had included Microsoft, Amazon and Alphabet.
HFR’s long/short index, which tracks the performance of stock-trading hedge funds that buy and sell stocks, was up about 7% for the year through July, according to the data company’s website.
The largest seven U.S. stocks collectively now make up about 20% of the total net market value held by hedge funds tracked by Goldman Sachs. They have also been instrumental in the gains in the broader U.S. equity market this year.
Microsoft , Apple, Alphabet, Meta, Amazon, Nvidia and Tesla saw the biggest percent of single stock exposure as of August 24, meaning the positions were trades in the individual stocks, not just in the indices like the Nasdaq.
The companies did not immediately respond to a request for comment.
“We essentially have had two markets: the ‘Magnificent Seven‘ and all the rest of equities. Hedge funds will be forced into capturing these returns regardless of analysis,” Jim Neumann, chief investment officer of Sussex Partners, said.
“It is momentum on steroids,” he said, adding that stock-picking hedge funds might find it harder to outperform investments in other asset classes, like fixed income.
Goldman Sachs, which runs one of Wall Street’s largest prime brokerages, is able to track trends in flows.
Shares in these companies have all risen over 35% this year with performances ranging from Apple’s positive 38% to Nvidia’s 211%.
“The primary objective of hedge funds is to generate returns, rather than to be imaginative for the sake of diversification,” said Bruno Schneller, a managing director at INVICO Asset Management.
Given the stocks’ outperformance, it makes sense to have invested in them, Schneller said.
Daniel Loeb, who runs Third Point – which had around $12.6 billion in assets under management at end-February – said earlier in August that his top five winners in 2023 had included Microsoft, Amazon and Alphabet.
HFR’s long/short index, which tracks the performance of stock-trading hedge funds that buy and sell stocks, was up about 7% for the year through July, according to the data company’s website.