24/7 Wall St – For much of the past two years, technology has dominated both long/short exposure and long/short performance in the hedge fund world. This has changed over the past quarter with technology dropping from overweight to simply in-line. The Prime Brokerage team at Credit Suisse took a look at the longer history of technology exposure. Net exposure in the United States has dropped to the lowest level since early 2011 despite gross exposure remaining at the highs. This is a startling revelation when almost every major Wall Street firm we cover is bullish on tech for 2014.
There is clear exposure dispersion within the underlying industries, with net exposure to software and services declining far less than the hardware and semiconductor groups. This part of the data tends to fall in line with the Wall Street thought process. Many firms are urging clients to move away from the big technology service stocks like International Business Machines Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ) and even Dell before its buyout. Hewlett-Packard has service exposure from its purchase of EDS. Dell has exposure from its 2009 purchase of Perot Systems. Hedge funds, as the data indicates, are selling these stocks less than the hardware and chip stocks, but they are selling.