Muppets Buy Along Pension Funds as Hedge Funds Sell on the Dip: BAML


Hedge funds buy on the dip according to Jill Carey, Equity Strategist at BAML. However, this report came out yesterday (and missed our attention), after today’s fears of Ben Bernanke tapering the equation may (or may not have changed). Stay tuned to our updates on exclusive hedge funds news to find out.  According to data last from last week, during which the S&P 500 was down 1.0%, BofAML clients were net buyers of $725mn of US stocks following two weeks of net sales. Inflows were led by private clients, whose purchases of US equities were the largest since January. This was their third consecutive week of net buying.

Hedge Funds buying

Hedge funds other institutions activity

Institutional clients were also net buyers following two weeks of net sales. Hedge funds—who had previously been the only group exhibiting faith in the market rally with seven consecutive weeks of net buying—were net sellers for the second consecutive week. By size segment, inflows were entirely in the large cap space. Year-to-date, private clients remain the only group who have been cumulative net buyers of US equities, but this is entirely due to ETFs. All three size segments are now seeing net sales YTD, amid a recent acceleration in net sales of small caps.

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Hedge Funds: Tech leads net buying; largest Utilities inflows in 19 months

Six of the ten GICS sectors saw net buying last week, with inflows led by Tech. Flows into Telecom and Utilities were particularly large vs. history despite continued fears of QE tapering, with net buys of Telecom their largest since February and net buys of Utilities their largest since November 2011. Sectors which saw the biggest outflows last week were Consumer Discretionary and Materials. Industrials continues to have the longest net buying trend at four consecutive weeks, while Health Care has the longest net selling trend at five consecutive weeks. Cyclical sectors continue to see net buying on a four-week average basis, which has been the case since late May, while defensive sectors continue to see outflows. The recent flows into cyclicals and out of defensives could represent the early stages of a shift in leadership, where inexpensive, globally diversified cyclicals outperform expensive, low beta domestic stocks.

Other notable data from hedge funds:

Consumer Staples, which previously had the longest net selling trend based on four-week average flows (since April), is now seeing net buys.

Consumer Staples and Tech saw net buying by all three client groups last week. Materials saw net sales by all three.

No size segment saw net buying by all three client groups last week, while small caps saw net sales by all three.

BofAML pension fund clients were net buyers last week following the previous week’s net sales. Net buys were led by ETFs and the cyclical sectors of Tech and Materials. Health Care saw the greatest outflows.