By Nell Mackenzie and Carolina Mandl
LONDON (Reuters) – The world’s five biggest hedge funds have doubled their footprint in the U.S. stock market through leverage and trading positions since 2014, according to a Goldman Sachs note to clients seen by Reuters.
The largest multi-manager funds, which employ a diverse set of trading strategies under one roof, now hold almost a third of the U.S. stock traded by the entire hedge fund industry, said the note, released on Sept. 8.
Although their portion of the total hedge fund industry’s assets under management is only 9%, their impact in the market is much larger because of the higher levels of leverage or borrowing they use, said the note.
“At this point, we estimate that multi-manager hedge funds hold 30% of the gross market value in U.S. equities,” said the note referring to just the hedge fund industry’s market footprint in U.S. stocks.
That was up 3 percentage points from last year, the note said.
Goldman Sachs declined to comment on whether the 30% market share marked a milestone.
The U.S. stock market was worth about $46 trillion as of the end of July, according to the Securities Industry and Financial Markets Association.
Goldman calculates that the biggest hedge funds have about 1% of this stock.
The size of the assets held by the biggest hedge funds also outstripped the rest of the industry, growing by 21% in the last 12 months versus 9% for the rest of the hedge fund industry, the note said.
Hedge fund size is often measured by the how much money is held in portfolios and what they have borrowed in order to put on those trades.
During the first half of 2023, multi-managers saw an average return of 1.4%. This was the first time in Goldman’s data that multi-manager hedge funds underperformed the risk free rate, or core government bond yields, Goldman said.
(Reporting by Nell Mackenzie and Carolina Mandl; Editing by Dhara Ranasinghe and Mark Potter)