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For HFs, It’s The Small Things That Count
Hedge funds tend to tip their collective caps to small companies, which may explain why large stocks can’t seem to outperform their punier peers, a Goldman Sachs analysis reveals.
Hedge funds tend to tip their collective caps to small companies, which may explain why large stocks cant seem to outperform their punier peers, a Goldman Sachs analysis reveals. In fact, hedge funds invest more than twice their assets in smaller companies than mutual funds do, 42% vs. under 20%. In addition, according to the Goldman analysis of 550 hedge funds with $650 billion AUM, hedgies had under 16% of their assets in companies with market value of more than $50 billion, while mutual funds invested 30%. There was another revelatory result in the survey: Hedge funds tend to hold on to their positions a lot longer than popularly believed. The term fast money does not accurately describe the investment strategy of most hedge funds, according to the report, which notes that nearly two-third of HFs studied did not change their positions in the quarter studied. One last thing: hedge funds tend to invest in consumer-discretionary, materials and information technology sectors, and are dramatically underweight in financial and consumer staple stocks.