Hedge funds have returned to buying financial sector stocks at the fastest pace since June 2023, with a particular focus on banks, insurance, and trading firms, according to a report by Reuters citing a note from the prime brokerage division at Goldman Sachs.
After maintaining a net sold position for seven of the last eight weeks, these stocks became the most sought-after on Goldman Sachs’ prime brokerage trading desk.
The shift in strategy consisted almost entirely of long positions, signalling expectations for rising asset prices. Europe’s STOXX 600 banking index gained 1.9% last week, while the Dow Jones banking index fell by 1.6%.
The hedge fund buying spree was concentrated in North America and Europe, particularly in banks, insurance firms, and capital market companies that facilitate trading, while hedge funds also moderately sold shares in consumer finance companies and mortgage trusts, the note added.
Despite the surge in financial sector investments, hedge funds remained net sellers in global equities, marking the ninth consecutive week of outflows, with the pace of sales reaching its fastest in five months.
Stock-picking hedge funds saw a 0.42% weekly gain, benefiting from a broader rise in equity markets. The S&P 500 climbed just over 4%, while Europe’s main stock index rose by 1.85%. However, systematic stock traders posted a 0.18% loss for the week ending September 13, according to Goldman Sachs.
