If you were wondering who was buying the dip in US tech stocks last week, Bank of America Merrill Lynch (BAML) has the answer.
Hedge funds, at least among its cash equities client base.
“After near-record sales of tech stocks two weeks ago, clients bought the dip in tech last week. But unlike the broad-based sales of Tech two weeks ago, buying was not broad-based. Hedge funds were big buyers of Tech stocks after selling tech the previous three weeks,” said Jill Carey Hall and Savita Subramanian, equity and quant strategists at BAML.
The pair note that inflow last week from hedgies into the tech sector were the second largest on record dating back to when the data was first collated in 2008.
Hall and Subramanian note that while hedge funds bought aggressively, its institutional and private clients continued to sell.
And given extreme long positioning in the sector among active fund mangers, they suggest this remains a key risk as end-of-quarter rebalancing looms.
In BAML’s latest global fund manager survey released earlier this month, 57% of respondents said valuations in the tech sector were currently “expensive” with a further 18% deeming them to be “bubble like”.
Only 1% currently valued the sector as being cheap.
It’s now a little more clear as to which type of investors were in the latter group.