Hedge funds add tech in Q3, bet on U.S.-China trade
The information technology sector was the most popular sector among hedge funds as of Sept. 30, with a net allocation of 18.9% from a collective $2.1 trillion in assets under management. However, that allocation was still underweight relative to the broad U.S. Russell 3000 index by 218 basis points. Health care was the largest overweight among the group, with a 17.4% net exposure vs. the equity index's 12.9% allocation. Consumer staples and financials were the largest relative underweights. Hedge funds' net exposure to consumer staples was 2.8%, compared with the index's 7.5%, while their net exposure to financials of 9.4% was 4.15 percentage points below that of the index.
Of the 833 funds observed, their exposure to the tech sector has been selective and near neutral. The sample's 18.6% long exposure was offset by a 18.4% short exposure. During the third quarter, hedge funds added long positions to IT services and semiconductors, betting that U.S.-China trade negotiations will be resolved positively. This trend was also observed among other sectors as positions in U.S. companies with significant sales in China and U.S.-listed Chinese internet stocks also increased during the third quarter.