The Goldman Sachs Equity Fundamental Long/ Short Performance Estimate ticked up 2.16% the week of April 18 through 24, underperforming the MSCI World Total Return Index’s gain of 3.56%. According to the firm, beta of 1.73% drove the majority of that estimated gain, with only 0.43% coming from alpha.
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Leverage rises even more
According to Goldman’s report dated Friday, overall book gross leverage rose 0.5 points to 284% — despite the controversy over high hedge fund leverage. That level was at the 81st percentile over the last year. Meanwhile, net leverage rose 1.4 points to 70.2%, in the fifth percentile over the past year.
Goldman Sachs reported that the overall book long/ short ratio was 1% to 1.657, in the sixth percentile over the last year. Fundamental long/ short gross leverage rose to 203.8%, the 100th percentile over the past year, while fundamental long/ short net leverage rose 1.5 points to 48.9%, in the seventh percentile.
Short covering accounts for most net buying
Following eight consecutive weeks of net selling, hedge funds net bought global equities for the second straight week last week, with short covers accounting for almost all of that buying. The short-to-long buying ratio was 9.8 to 1.
Every region except developed Asia was net bought that week, with North America and Europe leading the way. According to Goldman, global single stocks were net sold for the ninth consecutive week with long sales being the driver. Macro products were net bought for the third consecutive week, driven by both short covering and long buying.
Goldman reported that six of the 11 sectors were net sold the week of the 18th, led by industrials, health care and staples in notional terms.
Short and long sales drive staples selling
Highlighting consumer staples, the firm reported that both short and long sales drove the sector’s net selling last week. Europe led the way with net selling of consumer staples stocks, with both short and long sales. Almost all subsectors were net sold except for household and personal care products.
According to Goldman, hedge funds have net sold consumer staples in seven of the last nine weeks. As a result, the Prime book is now underweight the sector by 4% versus the MSCI World Index, ranking in the ninth percentile over the past year and the 74th percentile over the last five. The global staples long/ short ratio now stands at 1.39, in the third percentile over the last year.
Hedge funds bought financials last week
Consumer discretionary, financials and real estate were the most net bought, led by financials in the U.S. In fact, financials is now the second-most net bought sector in the U.S. year to date. Long buys outpaced short sales in the financials sector by 6.8 to 1.
According to Goldman Sachs, hedge funds have net bought financials stocks in the U.S. in five of the last seven weeks. Financials gross exposure as a percent of the total U.S. book stands at 14.2%, or two-year highs, while net exposure stands at 13%, the highest level since May 2023.
The U.S. financials long/ short ratio stands at 1.69, in the 50th percentile over the past year.
