According to a recent report by Goldman Sachs, European hedge funds have swiftly decreased their investments in US banks since the start of the year while maintaining their positions in European banks. The Wall Street bank, which operates one of the largest prime brokerages globally, has insights into the movements of major hedge funds and asset managers. The report obtained by Reuters stated, “In Europe, hedge funds have rotated out of banks and insurance into financial services in the past couple of months, but still positioning in European banks remains stronger than in U.S. banks.”
Goldman Sachs, however, has not yet provided an official comment on the report. The data reveals that European investors exhibit a more optimistic outlook towards banks within their own continent, while adopting a more neutral stance towards US banks. The sentiment of investors is measured using the long/short ratio, which involves dividing long positions by short positions.
As of the end of June, the long/short ratio for US banks was approximately 100%, indicating that hedge funds, on average, hold a long position in one bank stock while simultaneously holding a short position in another bank stock. In contrast, the ratio for European banks stood at around 190%, reflecting a higher level of positivity as hedge funds maintain long positions in European bank stocks.
The shift in investment strategies by European hedge funds highlights their confidence in the European banking sector compared to their caution regarding US banks. These trends could be influenced by various factors such as market conditions, regional economic outlooks, and regulatory environments.
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