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Hedge funds reduced their bets in the past year that U.S. stocks would gain as the Standard & Poor’s 500 Index declined and credit conditions tightened, Goldman Sachs Group Inc. said.
Such wagers accounted for 32 percent of funds’ equity investments as of June 30, compared with 45 percent a year earlier, analysts led by David Kostin said in an Aug. 21 report.
Hedge funds cut their holdings in financial, consumer and industrial companies, while investments in utilities, telecom services and materials were little changed in the period, Goldman said. Bets that financial stocks would fall accounted for 24 percent of holdings at the end of June; the previous year, 32 percent of funds’ portfolios wagered that financials would rise, the bank said.
Goldman analyzed quarterly filings of 745 hedge funds with combined equity holdings valued at $881 billion. The filings exclude trades using options and futures contracts as well as indexes that may offset funds’ equity holdings. The filings also exclude holdings of companies not based in the U.S.
Globe and Mail- Hedge funds may post their worst month in at least five years after bets on financial stocks falling and on crude oil rising backfired.
Hedge Fund Research Inc.’s Global Hedge Fund Index of more than 55 funds slid 3.2 per cent through July 24, heading for the biggest monthly drop since the measure started in 2003.
Wagers on a drop in financial stocks and home builders soured after shares of U.S. mortgage lenders Fannie Mae and Freddie Mac more than doubled during the six trading days to July 23.
Bullish bets on crude oil turned to a loss as oil slid 15 per cent from a record $145.29 (U.S.) a barrel on July 3 after doubling in a year.
Bloomberg- Perella Weinberg Partners’ Xerion hedge fund rose 24 percent this year, helped by wagers that the value of investment-grade bonds of financial-services firms would fall, according to a letter sent to investors.
The $837 million fund, which invests in the shares and debt of troubled companies, has far outstripped competitors, which have lost 1.6 percent on average in the first half of 2008, according to Chicago-based Hedge Fund Research Inc.
There will be more chances to invest in companies going into or emerging from bankruptcy because of increasing losses at Wall Street banks and a slowing U.S. economy, said Daniel Arbess, New York-based Xerion’s founder and a Perella partner. Lending opportunities will also rise.
