Goldman Strategist Sees ‘Very, Very Small Sand Box’ For Stock Hedge Funds

May 30 2014 | 9:38am ET

A top Goldman Sachs strategist is anything but bullish on hedge funds this year.

David Kostin, the bank’s chief equity strategist, said there are too few opportunities out there for the industry to do well. Citing consumer-discretionary stocks, which make up about a quarter of equity hedge funds’ portfolio, Kostin said the dispersion of returns is too small to permit successful long/short trading.

“The opportunity set, the sand box, the swimming pool is very, very small,” he told Bloomberg Television. “It’s been a very difficult year from a stock-selection perspective.”

The troubles are forcing hedge funds to abandon what Kostin called “glamour stocks” in favor of a value-investing approach.


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