S&P Global Intelligence: Hedge Funds Continue to Shed Equity Positions in Q2/16

Aug 18 2016 | 9:49pm ET

Hedge funds continued to trim equity positions in the second quarter despite improving market performance, according to the latest edition of S&P Global Market Intelligence’s Hedge Fund Tracker report. 

The report, which is based on information, disclosed on the quarterly 13F regulatory filings of pure play hedge funds, provides an aggregate analysis of hedge fund equity ownership and 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, although they decreased the number of positions to 399 in Q2 from 408 in Q1. This number broke last quarter's record for 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, the analysis found. 

"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 for 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.

S&P Capital IQ meshed with S&P’s SNL division and rebranded as S&P Global Market Intelligence on February 8, 2016. The firm is a provider of financial and industry data, research, news and analytics to investment professionals, government agencies, corporations, and universities worldwide. 

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