Goldman’s David Kostin identifies three big trends from the last hedge fund 13-Fs, and what they’re doing with their $1.2 trillion in equity assets:
Hedge funds own gold in response to a fear of rising inflation
Hedge funds own $23 billion of long positions in Gold Stocks and ETFs with approximately $8.6 billion or 38% of their exposure held in the form of the SPDR Gold Trust ETF (GLD). Hedge Funds own an additional $9 billion in Fertilizers & Agricultural Chemicals stocks and Agricultural ETFs, including $4 billion of Potash (POT) as a consequence of M&A activity.
Funds increased long exposure to Materials and Industrials in 4Q
Materials and Industrials represented the largest increases in hedge funds’ long asset allocation during 4Q (66 bp and 65 bp respectively). Hedge funds reduced exposure to Financials, Telecom Services and Health Care.
Large-caps ($10+ billion) account for 47% of aggregate assets
Roughly 47% of the aggregate equity assets of hedge funds are invested in stocks with equity capitalizations greater than $10 billion as of 4Q 2010. The typical hedge fund allocates 35% of its assets to large-cap stocks. The difference between the average and the aggregate suggests that hedge funds with the largest assets under management target large-cap stocks.