XLY - Jefferies: Hedge funds trimmed equity exposure headed into summer favored tech

2023-08-01 08:58:59 ET

Jefferies said Tuesday that recently released data showed that hedge funds trimmed their exposure to equities headed into summer, although their commitment to stocks remained strong compared to the longer-term average. Meanwhile, these investors added to their positions in tech stocks, even as they pulled back in areas like consumer discretionary.

“As of the end of May, hedge funds brought their equity exposure down slightly, with the long portion of the portfolio moving to 207% from 230% at the end of April. This is still above the long-term average of 18,” Jefferies stated in a client note, citing MSCI hedge fund data as of May 31.

Moreover, the data points to the fact that there were big shifts across sectors with a jump in tech ( NYSEARCA: XLK ) ( VGT ) and a trimmed position in consumer discretionary ( NYSEARCA: XLY ) ( VCR ).

“Most notable for us was the increase in tech to 24.2% from 19% one-month prior, and back to levels last seen in January. However, these investors are still UW the sector relative to the S&P 500 by 3.8%,” Jefferies stated in a client note.

“Discretionary was trimmed by 3% to 7.1% and this is its lowest weighting since May '19 and now UW the group by 3.3%," the firm added.

The investment institution also highlighted that energy ( NYSEARCA: XLE ) ( VDE ) and real estate ( XLRE ) ( VNQ ) are still net short across the portfolio but the gap has narrowed, while hedge funds also lowered their weightings in financials ( NYSEARCA: XLF ) ( VFH ) by 5% and moved to 14.6% of the portfolio from 19.7%.

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