Hedge funds are increasing their gross exposure to equities to a greater degree than institutional investors are. The total market value disclosed and attributable to equities for the average hedge fund in AlphaClone's universe increased 8% to $3.2 billion in the first quarter of 2011 versus the fourth quarter of 2010. By comparison, the total market value attributable to equities for the average institutional fund decreased by 6% over the same period. The S&P 500 returned 5.4% in Q1 2011.
The latest numbers also indicate that hedge fund equity gross exposures are accelerating. Comparing total market value disclosed and attributable to equities for the average hedge fund versus the measure's moving average over the prior four quarters, we see the spread has increased to 15% in Q1 2011 from 13% in Q4 2010 and 7% in Q3 2010. Conversely, for institutional funds we see a spreads reverse from 4.1% in Q4 2010 to -1% in Q1 2011. Popular hedge funds stocks with the highest sentiment include:
Largest Hedge Fund Holder (in $)
||Fir Tree Partners|
With the latest pullback in the market, and barring any proverbial black swan event(s), we would expect hedge fund equity gross exposures to continue to increase this quarter. But we'll have to see how the numbers look in mid-August, when the next round of filings is due.
Below is the total market value disclosed and attributable to equities in each quarter since 2000 for all funds, just hedge funds, and just institutional funds. The red line in each graph represents the measure's moving average over the prior four quarters.
Maz Jadallah is the founder and CEO of AlphaClone LLC, a San Francisco-based research and investment management firm that tracks hedge fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.
Maz Jadallah doesn't own shares of any of the companies mentioned in this article. AlphaClone LLC is an investment management firm and currently holds shares of Apple, JPMorgan Chase, Google, Microsoft, and Pfizer on behalf of investment clients.
The Motley Fool owns shares of Apple, Google, JPMorgan Chase, and Microsoft. Motley Fool newsletter services have recommended buying shares of Pfizer, Apple, Google, and Microsoft, creating a bull call spread position in Apple, and creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
3 Top Cash-Rich Stocks to Buy
Love cash? These three stocks need to be on your watchlist.
Could Microsoft Be the First $1 Trillion Company?
Five years ago: Absolutely not. Today: Yeah, maybe.
Windows on ARM Is Back, and It Makes Sense This Time
Microsoft's second attempt put Windows on devices powered by mobile processors looks like a winner.