Deutsche Bank on Friday alerted clients to a potential shift taking place with the favorite holdings of the hedge fund industry as active managers try to align their portfolios with President-elect Donald Trump's pro-growth economic policies.
"We believe the postelection drawdown in HF Aggregate Value signaled a significant rotation in hedge fund positioning. Hedge funds likely sold some of their largest, most liquid, and most widely-held positions - primarily large-cap technology and consumer stocks - to buy banks, healthcare, small-caps, and other perceived beneficiaries of a Trump presidency," strategist Hallie Martin wrote in a note to clients.
According to the latest third-quarter data from before the election, active hedge funds remained highly concentrated in the following consumer discretionary, staples and technology companies.
So as active managers rebalance their portfolios in anticipation of a pro-growth agenda under Trump, some of these holdings may head south, Deutsche Bank warned.