Goldman Warns Hedge Fund Outperformance Holds Crowding Risk
- Health care becomes largest overweight amid rotation from tech
- Study of 835 equity funds reveals strongest results since 2009
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Equity hedge funds are enjoying their strongest performance since 2009 -- with the S&P 500 index up 16% this year -- but Goldman Sachs Group Inc. warns that crowding is a risk.
Funds have benefited from both a rising stock market and successful stock selection, strategists including Ben Snider and David Kostin wrote in a note Aug. 20. They’ve also concentrated their holdings into a reduced number of industries, such as health care, and into single names, particularly Amazon.com. Inc. When rallies peak, too much professional money can try to get out of the same stocks simultaneously and exaggerate declines.