Recession risk a concern but fund portfolio holdings consistent with soft landing expectations

December 5, 2022 11:04 AM EST
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Goldman Sachs analyst David Kostin said in a note to clients on Monday that the firm's analysis of $5 trillion of hedge fund and mutual fund holdings "show more similarities than differences."

The firm recently published reports that analyzed 786 hedge funds with $2.3 trillion of gross equity positions and 548 mutual funds with $2.5 trillion of AUM at the start of 4Q 2022.

"Macro hedge funds have performed well YTD (+8%) while in a falling market equity hedge funds and large-cap core mutual funds both returned -11%. Mutual fund overweights have outpaced popular hedge fund longs (-4% vs. -27%)," said Koston.

The analyst added that funds disagree on Big Tech, although there are 12 "'shared favorites': CEG, DHR, FISV, HUM, MA, NOW, SCHW, UBER, UNH, V, WDAY, WFC."

"Both equity mutual funds and long/short hedge funds have modestly outpaced the -13% YTD return of the S&P 500. 55% of large-cap mutual funds have beaten their respective benchmarks this year, which is the highest hit rate of outperformance since 2007 and significantly above the long-term average hit rate (34%). The average mutual fund portfolio has outperformed the Russell 1000 by 105 bp YTD, highlighting the strength of their stock picking in 2022. While the average macro hedge fund has returned +8% YTD, the typical equity long/short hedge fund has returned -11%," Kostin continued.

The analyst went on to state that while recession risk remains a concern for all investor categories, their analysis of mutual fund and hedge fund portfolio holdings reveals that "thematic, factor, and sector exposures are consistent with expectations for a soft landing."

By Sam Boughedda.

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