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Hedge Fund Ownership

Lacking discretion

July 1, 2021

Over the past year, hedge funds have been backing away -- slowly but inexorably -- from the Consumer Discretionary sector. Exposure stood at 14.73% of AUM at the end of 2020's third quarter and, as of the last round of 13F filings, has dipped to 13.60%. When one considers that the economy is growing rapidly after a year of bottled-up demand and consumer confidence keeps rising, this seems counterintuitive if not countercyclical. Do fund managers believe that our appetite for new cars and luxury goods will soon be sated? Have hotels reservations started tapering off already? Did we finish up all our holiday shopping over Prime Day?

And yet the rotation is clearly on. Financials, in the meantime, have risen from 10.81% of AUM to 11.96%. Bets are also being made in Energy and Materials.