Hedge funds switch to buying banks, insurance and trading firms, says Goldman Sachs

By Nell Mackenzie

LONDON (Reuters) – Banks, insurance and trading firms returned to favour as hedge funds last week snapped up these company stocks at the fastest pace since June 2023, a Goldman Sachs note showed.

After holding a net sold position in seven of the last eight weeks, financial sector stocks were the most sought after on Goldman Sachs’ prime brokerage trading desk, which lends to hedge funds and tracks their trades, the note released on Friday and seen by Reuters on Monday showed.

These bets comprised almost entirely long positions, it said.

A short position bets that an asset price will decline in value, and a long position expects it to rise.

Europe’s STOXX 600 banking index rose by about 1.9% during the week to last Friday, while the Dow Jones banking index closed down 1.6% for the week.

The hedge fund buying was concentrated in North America and Europe, the note said.

Hedge funds took long positions in banks, insurance and capital markets companies that facilitate trades.

On the flip side, they moderately sold consumer finance companies and mortgage trust firms, Goldman said.

Overall, hedge funds finished the week with more sell positions in stock markets, the note added.

They sold global equities for the ninth straight week and at the quickest pace in five months, it said.

Stockpicking hedge funds posted a 0.42% weekly performance gain driven in part by the general rise in equity markets, the bank said.

The S&P 500 index rose just over 4% last week, while the broadest European stock index rose 1.85%.

Systematic stock traders saw a negative -0.18% for the week to Sept. 13, the note said.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Barbara Lewis)