Hedge Funds Adding Stocks to Portfolios As Market Improves

February 26, 2013 James Heinsman Hedge Fund News

It’s been six long years since hedge funds have felt this much confidence in the stock market, increasing their net long exposure to 52 percent during the fourth quarter of 2012. That amount of stock is the highest percentage reached for hedge funds since the first quarter of 2007, according to a report by a large investment firm.

"My expectation is that the market will reach a new high by the end of the year, with the S&P 500 at 1575," said David Kostin, Chief U.S. Equity Strategist who co-authored the report. "Picking up the net exposure is consistent with the idea of gaining exposure to a rising equity market."

"The strategy of following the (hedge fund) community has been a very successful one," he said. "These positions matter."

The new darlings of the hedge fund world are AIG and Google, both companies’ shares surpassing Apple as the top long position by the funds. AIG came out on top, with 80 funds incorporating the firm in their top ten favored holdings. The average representation in the portfolios was 8 percent.

The report also noted that stock turnover was also at a record low point. Kostin explained this as an overall strategy held by hedge funds because managers are quite conservative, “tending to buy positions they already own.”

AIG, Apple, David Kostin, Google, Hedge Funds,

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