Hedge funds snap up stocks at fastest pace in 11 months, Goldman says

HONG KONG, March 7 – Hedge funds piled into global equities at the fastest pace in almost a year in February as investors become more bullish on stock markets from the US to Japan, Goldman Sachs said.

The significant boost in hedge funds’ net purchases of equities was observed across all major regions worldwide last month, marking the strongest monthly net inflow from these funds into global stocks since March 2023, Goldman Sachs said in a note from their prime services team dated March 6.

The note didn’t give details of the purchase volume.

Global equity markets have been buoyant as markets prepare for imminent Federal Reserve interest rate cuts and a boom in the tech sector. The MSCI World Index has been rising for four months in a row.

Hedge funds’ risk appetite is rising rapidly, with gross leverage level hitting fresh record highs recently, Goldman Sachs said.

By region, hedge funds switched to net purchase of US stocks for the first time in seven months, Goldman Sachs said, spurred by extended wagers on semiconductor-related equities driven by the artificial intelligence (AI) boom.

Yet, the inflow into the “Magnificent 7”, the largest US companies by market value, such as Apple and Nvidia, “collectively is little changed so far this year,” the bank said, adding that fund managers preferred smaller tech companies.

Interest in Asia is also recovering, led by Japan. Japan recorded the largest hedge fund net buying in eight months as the Nikkei soared to all-time highs, according to Goldman Sachs.

Japanese stocks have soared through 2023 as the world’s fourth-largest economy shows signs of emerging from deflation and companies take steps to improve governance.

Net allocation to Japanese stocks returned to above 5-year averages “but remains well below historical peak levels,” Goldman Sachs said, suggesting more room for the market rally.

Meanwhile, Chinese equities also attracted net buying for a third straight month while net allocation to Europe and emerging markets ex-China rose to about 5-year highs, Goldman Sachs said.

(Reporting by Summer Zhen; Editing by Jacqueline Wong)