Goldman Says Hedge Funds Held Onto Tech Stocks During Wednesday's Market Slide

Hedge funds have largely maintained their holdings in technology stocks this week, despite the largest U.S. market selloff in over a decade, according to research by Goldman Sachs.

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The selloff led to the Nasdaq 100 and S&P 500 indices experiencing their worst single-day losses in years as investors exited U.S. tech companies over concerns about the profitability of artificial intelligence investments.

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In a note, Goldman Sachs analysts, led by Vincent Lim, explained that the selling was primarily driven by long-only funds reducing their positions, while long/short hedge funds remained relatively calm during the market turmoil.

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“The U.S. market selloff appears to be driven by significant length reduction by the long-only community and less about further de-grossing by hedge funds, following large risk unwinds seen last week,” the Goldman analysis stated.

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Previously, hedge funds had reduced their exposure to the tech sector, resulting in a substantial selloff of technology, media, and telecom stocks in June, the largest since 2016.

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Analyzing transactions through Goldman Sachs’ prime brokerage division, the analysts noted that the recent U.S. market drawdown was driven by a widespread selloff of macro products, including index funds and exchange-traded funds, primarily through short sales.

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In contrast, single stocks were moderately net bought during the Wednesday selloff, with investors purchasing shares in energy, financials, and consumer discretionary companies, offsetting selloffs in the industrials, staples, and utilities sectors.

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Despite being the worst-performing sector during Wednesday’s selloff, the info tech sector was only marginally net sold, according to Goldman Sachs’ prime brokerage data.

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“While info tech was by far the worst-performing sector on Wednesday, it was only marginally net sold, suggesting hedge funds were relatively calm and staying put at the single stock level,” Goldman’s analysts noted.

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