US equity long-short hedge fund portfolio managers are taking fewer directional bets, with the level at which swings in the S&P 500 affect their bottom line having fallen to the lowest seen in six years, according to a report by Reuters.
The report cites data from hedge fund research firm PivotalPath as showing that hedge funds are increasingly adopting a more defensive strategy as concerns about the macroeconomic environment have made making directional stock market bets more difficult.
According to PivotalPath Chief Executive Officer Jon Caplis, while the current prevailing view that interest rates will stay higher for longer “has generally decreased confidence”, the recent rally in select stock sectors including mega cap tech companies has not generated the usual spike in confidence surrounding broader rallies.
Data from PivotalPath, which tracks $3tn in global hedge fund assets, reveals that hedge fund beta – the volatility of returns – currently stands at 0.3 compared with an historical mean value of 0.43, indicating lower sensitivity to stock market movements.
