Hedge funds made a decisive return to financial stocks last week, snapping an eight-week selling streak to become net buyers of bank shares, according to a report by Reuters citing a recent research note from Goldman Sachs.
The financials sector – led by US banks – is now the second-most net bought among hedge funds in 2024, trailing only real estate, the note revealed. The renewed interest follows a wave of robust Q1 earnings reports from major US banks, which appear to have reassured investors and prompted a repositioning.
JPMorgan Chase and Morgan Stanley reported record trading revenues in the first quarter, while Wells Fargo saw a strong pickup in client fee income, helping boost sentiment toward the sector.
Goldman said hedge fund exposure to financial stocks has climbed to its highest level in two years, with managers taking long positions in five of the past seven weeks. The volume of outright long buying last week significantly outpaced covering of short positions, suggesting a shift in conviction rather than mere position adjustment.
Within the financials sector, hedge funds were particularly active in capital markets firms and trading infrastructure providers, which Goldman noted have been the most net bought sub-sector year-to-date.
The timing of the rotation coincides with a rebound in hedge fund performance. Global long-short equity funds gained more than 2% between 18 and 24 April, while systematic strategies posted a 0.44% increase over the same period.
