Hedge Fund Love Affair With Tech Sours as Bearish Bets Pile Up
(Bloomberg) -- Live by technology shares, die by technology shares. Unless you can guard against declines.
Hedge funds are increasing short bets on tech stocks, especially in the U.S., where combined positioning shows managers the least reliant on American technology firms in nine months, according to data from Credit Suisse Group AG’s prime services. The worldwide view also reveals newly added bearish wagers while long positions have remained steady.
As global tech stocks climbed to their highest level since 2000, hedge funds found themselves overwhelmingly overweight and increasingly nervous. So they added wagers on declines that effectively dropped their technology exposure to a defensive stance that’s been rare in 2017, the Credit Suisse data show.
An increase in short bets is especially pronounced in U.S. stocks, where combined positioning shows managers the least reliant on American technology firms in nine months. The broader global view also reveals newly added bearish wagers while long positions have remained steady.
Betting on market darlings, a so-called momentum trade, has been a dangerous but rewarding game for most of this year. Though technology stocks have led gains globally, they’ve also been harshly punished when bouts of nervousness bubble up.
Tech companies in the MSCI World Index have surged 36 percent in 2017, on track for the best year since 2009 and the best performance out of the gauge’s 11 industry groups. Even so, there have been bouts of turmoil, like in June when tech tumbled 2.4 percent while the broader index gained 0.3 percent.
Hedge funds still have some ways to go before they turn bearish altogether -- an outsized technology bet has helped give funds their best year since 2013. Likewise, large speculators on the tech-heavy Nasdaq 100 futures are still bullish, but the number of net long contracts has fallen to 28,742 from a high of 162,662 last year, weekly data from CFTC show.
©2017 Bloomberg L.P.