Hedge funds switch to buying banks, insurance and trading firms, says Goldman Sachs By Reuters

By Neil Mackenzie

LONDON (Reuters) – Banking, insurance and trading stocks are back in the red as hedge funds last week bought shares in these companies at the fastest pace since June 2023, a note from Goldman Sachs showed.

Financial stocks were the most in demand on Goldman Sachs’ main trading desk, which lends to hedge funds and tracks their trades, after holding a net short position in seven of the past eight weeks, a note released on Friday and seen by Reuters on Monday showed.

The company said these bets consist almost entirely of long positions.

A short position bets that the price of an asset will fall in value, and a long position expects it to rise.

The European banking index rose about 1.9% during the week ending last Friday, while the Dow Jones Bank Index closed down 1.6% during the week.

The note said that hedge fund purchases were concentrated in North America and Europe.

Hedge funds have taken long-term positions in banks, insurance companies and capital markets that facilitate trading.

On the other hand, Goldman said they moderately sold consumer finance and mortgage companies.

Overall, hedge funds ended the week with more short positions in equity markets, the note said.

They said they sold global stocks for the ninth straight week and at the fastest pace in five months.

Hedge funds specializing in stock picking posted a 0.42 percent weekly gain in performance, driven in part by the general rally in equity markets, the banks said.

The European stock index rose more than 4% last week, while the broader European stock index rose 1.85%.

Regular stock traders were expecting a -0.18% decline during the week ended Sept. 13, according to the note.