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Funds increase bet in consumer discretionary, Google present in majority of funds

May 17, 2013

GICS Sector Analysis: Top 50 Hedge FundsThe 50 largest hedge funds increased their equity exposure by over 5% in Q1 2013. This quarter, Boeing Co. was the favorite allocation of the funds. The stock experienced $1.6 billion in inflows, which amounted to nearly 250% of its Q4 value in the funds’ aggregate portfolio. Boeing’s shares are up 28.2% year-to-date (“YTD”), compared to 15.7% for the S&P 500. However, the largest dollar-value increase in equity exposure arose from the January IPO of Norwegian Cruise Line Holdings Ltd, which was backed in part by Apollo Global Management LP. It’s also interesting to note that, though the funds sold some exposure in Google Inc. (Cl A), the technology company was present of the majority (62%) of the fifty hedge funds’ portfolios. This distinction was previously held by Apple. Two quarters ago, Apple was held by just as widely as Google, and it was the largest equity holding of nearly one-fourth of the funds. However, by Q1 2013, Apple was held by only 40% of the funds, with only four carrying it as the top stock holding.

While the top 50 hedge fund managers largely increased their exposure to equities, the funds also made significant reductions to their stakes in two successful stocks in 2013: News Corp. (Cl A) and American International Group Inc. The funds reduced their holding in News Corp by 20.3%, and the stock represented the largest individual equity sale in three of the fifty hedge funds. In addition, the funds reduced their exposure to AIG by 16.2%. With these sales, fund investors seem to be predicting a slowdown or reversal for these two issues, as AIG and News Corp. have had very similar YTD returns as Boeing in 2013: 27.2% and 28.8%, respectively.

At the country-level, the top 50 hedge funds continued their home country bias by adding primarily to U.S. equities (90% of the top 50 funds are domiciled in the U.S.). Stocks domiciled in Australia, on the other hand, received the largest decline in country exposure. This was primarily due to sales of Aurizon Holdings Ltd., a local freight transportation and infrastructure company.

Read more about the ownership trends of hedge funds in this quarter's edition of FactSet Hedge Fund Ownership Quarterly. Visit www.factset.com/hedgefund_ownership to launch the latest report.  

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