Overview
Goldman Sachs client notes indicate that, in the week to Friday 13, global hedge funds accumulated a record volume of stock in both developed and emerging Asian markets. The positions taken were broadly bets that share prices in the region would advance, with the strongest concentration of buying focused on emerging Asia, according to the bank's client note.
Market backdrop
World equity indices experienced a sharp drop on the Friday of that week as investors intensified selling of technology shares, driven by concerns about large-scale investment in artificial intelligence and its potential disruptive effects. Despite that late-week weakness, several Asian markets produced positive returns for the week: Japan's Nikkei and Taiwan's equity benchmark each gained around 5%, while South Korea's Kospi added more than 8% over the course of the trading week.
Where hedge funds placed their bets
The Goldman notes show that hedge funds concentrated bullish equity trades in Korea, Taiwan and China. Goldman did not offer a reason for this geographic preference in the circulated client note. The bank also recorded "modest selling" activity in India during the same period.
Across sectors, the buying was broad-based across most industries in Asia. Hedge funds took positions in real estate, technology companies, industrials and consumer discretionary names. Financials were a notable exception - funds did not increase exposure to that sector in the same way.
Flows in U.S. equities and sector dynamics
On the other side of the Pacific, after four weeks of net selling, hedge funds were marginally net buyers of U.S. equities, according to a separate Goldman Sachs note. Technology stocks saw the largest net buying since December 2021, but Goldman noted that, even with that buying, tech still had more sellers than buyers overall.
U.S. consumer discretionary names were the most net sold sector - hedge funds recorded their largest exit from that area in more than five years, the note said.
Risk appetite and leverage
Goldman reported that gross leverage - a measure of the total risk funds have deployed - rose to 307% from 301.2% the prior week, marking a five-year high. The increase in leverage underscores higher risk in hedge fund positioning as managers boosted exposure to Asian equities.
Promotional excerpt included in the original note
The original material accompanying the client notes contained a promotional passage about a stock-picking service that highlighted claims including that, year to date, two out of three global portfolios were beating their benchmark indexes with 88% of holdings in the green, and that a flagship strategy had doubled the S&P 500 within 18 months with specific winners mentioned. That passage appeared separate from the Goldman Sachs flow data.