A Look At Hedge Funds' Best And Worst Sectors

Via AB Insights

Due to the congestion of their investor base, crowded hedge fund stocks are volatile and vulnerable to mass selling. The risk-adjusted performance of consensus bets tends to disappoint. In the past pieces we illustrated the toll of crowding on exploration and production as well as internet companies. We also reviewed two specific crowded bets: SanDisk and eHealth.

While crowded hedge fund ideas do poorly most of the time, they don’t always. Market efficiencyvaries across sectors, and some industries are more analytically tractable than others. In this article we survey the sectors with the best and worst hedge fund performance records. We will illustrate when investors should stay clear of crowded ideas...