Hedge funds ramp up tech allocations, says Goldman

Hedge funds ramp up tech allocations, says Goldman
Data show amped-up net buying in sector through long positions and short-covering even amid a slide in S&P 500 IT index.
APR 29, 2024
By  Bloomberg

The risk-on momentum in technology stocks last week wasn’t lost on hedge funds, who scooped up the sector’s companies at the fastest clip in more than a year.

Technology stocks saw the largest net buying since December 2022 last week by the group, driven by an increase in long positions and short-covering, data compiled by Goldman Sachs Group Inc.’s prime brokerage show.

Hedge funds were net buyers of the sector for a fourth straight week, defying weakness in the S&P 500 Information Technology Index, which has been sliding for most of April amid concern the Federal Reserve will keep interest rates higher for longer. Their buying looked prescient last week, when upbeat earnings from Google parent Alphabet Inc. and Microsoft Corp. boosted investor optimism in the sector’s fundamentals.

“The long-term potential for technology is quite clear and almost unarguable,” said Seema Shah, chief global strategist at Principal Asset Management. “Yet, with valuations so extended, many investors have been averse to adding exposure of late. The recent pullback has provided a small sigh of relief for valuations, giving the opportunity to gain exposure to a robust and secular theme.”

The S&P 500 Information Technology Index rallied 5.1% last week, snapping a four-week losing streak, its longest since September. Alphabet soared past $2 trillion in market value as it reassured investors about its prospects with AI. Microsoft’s stock also gained after the firm showed progress on AI in their quarterly results.

“Earnings overtook sentiment,” Goldman analysts including Vincent Lin wrote in a note, adding that there were no major drags on the S&P 500 Index besides Meta Platforms Inc., which posted sales guidance that trailed expectations.

While nearly all technology sub-sectors saw inflows, buying was led by semiconductors and semiconductor equipment companies. Hedge funds’ allocation in the sub-sector jumped to 4.4% of the overall US single-stock allocation — the highest level in more than five years — from 1.1% at the start of the year, the bank’s data show.

All told, hedge funds net bought US stocks at the fastest pace in about five months last week. The S&P 500 posted its best week of 2024, closing a hair away from 5,100.

However, buying wasn’t uniform, as there was more net selling in consumer discretionary stocks, with managers offsetting new longs with more aggressive short sales, and in staples where short sales dominated.

Small-caps benefitting from AI boom too, says Federated Hermes fund manager

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.