Hedge Fund re-risking slowed following large increases over 2009
Hedge fund long equity assets appreciated by 3% in 4Q compared with a
6% return for the market suggesting levered funds were net sellers. Funds
now own 3.8% of the Russell 3000 index compared with 2.9% in 4Q 2008.
Little change in net long exposure and net weighting in cyclicals
Hedge fund net long exposure increased only modestly to 42% in 4Q from
40% in 3Q. Net weighting in cyclical sectors rose to 73% from 72% last
quarter. Funds rotated within the cyclicals, moving out of Information
Technology and into Industrials and Consumer Discretionary.
Hedge funds rotate into Industrials and out of Info Tech
Hedge funds are underweight Information Technology for the first time
since 2005 when comparing their net weighting with the Russell 3000.
Hedge funds lifted their net weighting in Industrials to 9% from 6% during
4Q, the largest increase of any sector, but they remain net underweight.