Hedge Funds Rotate Out of AI into Healthcare, Financials, and Energy — Overweight in All Three Sectors Hits Decade Highs
Nashnova编辑部
Goldman's tracking of 991 hedge funds shows healthcare, financials, and energy net overweights all at or near ten-year highs, triggered by July's sharp AI-trade reversal — the VIP basket underperformed the S&P by 11 percentage points in a single month, the worst on record in over twenty years.
How big is this rotation?
Goldman's report covers 991 hedge funds with $5.4 trillion in total equity exposure ($3.4T long, $2.0T short).
Financials net overweight hit its highest since before the 2008 crisis; energy reached a post-2015 high; healthcare net exposure is 19% of total, overweight versus the Russell 3000 by 962 basis points.
This means → three sectors were loaded up simultaneously and systematically — capital flooded out of AI and into "old economy" plays in one move.
Why did July become the turning point?
In July the Goldman VIP basket — a proxy for hedge funds' most popular longs — underperformed the S&P 500 equal-weight index by 11 percentage points, worse than the −9 pp during October 2008 and the worst single month in the basket's 20+ year history.
The VIP basket's year-to-date excess return has a 0.9 correlation with Goldman's AI basket. This means → any swing in the AI trade transmits almost one-for-one into aggregate hedge-fund performance.
In plain terms = the industry's "best ideas" portfolio was so tightly bound to AI stocks that when AI broke, everything broke with it.
AI hasn't been abandoned entirely — what changed inside the trade?
Q2 portfolio turnover hit its highest since 2021; within IT specifically, turnover reached a post-2011 high. This reflects not a wholesale exit but a massive reshuffling of positions within the AI theme itself.
Most mega-cap tech names were trimmed, but Amazon and Microsoft were exceptions — both saw net additions. Meta dropped into the "falling stars" list.
Among AI-linked names, the biggest net additions went to infrastructure plays — Advanced Energy Industries, Viavi Solutions, Digital Realty Trust. The biggest net reductions hit semiconductor-equipment names — Applied Materials, Micron, Lam Research — even though those stocks were still rising at the time.
Healthcare, financials, energy — where exactly did the money go?
Healthcare: broad-based additions led by biotech; Axsome Therapeutics (AXSM) became a "rising star," Thermo Fisher (TMO) joined the VIP list. Managed care was the only sub-industry left out.
Financials: additions were balanced across sub-industries, with regional banks the most concentrated bet. Capital One (COF) was among the most popular holdings and a VIP-list member; CME Group and Intercontinental Exchange (ICE) saw the largest net increases in fund holders.
Energy: similarly broad across sub-industries. This reflects a full-spectrum allocation rather than a single-thesis bet across all three sectors.
What signal are leverage and short positions sending?
Gross and net leverage both fell sharply from Q2 record highs, yet remain elevated versus longer-term averages. Fundamental long/short funds sit at the 73rd percentile of five-year gross leverage and the 38th percentile of net leverage.
Leveraged funds hold a near-record net short in Nasdaq 100 futures; short exposure has grown 35% since mid-June. Median S&P 500 stock short interest is at a 15+ year high.
In plain terms = funds are de-leveraging with one hand and heavily shorting tech indexes with the other — this is hedging, not panic, but the defensive posture is unmistakable.
What should investors watch next?
IT still commands the largest long-portfolio weight at 25%, but net exposure is just 15% — a record underweight versus the Russell 3000's 33% IT weight. Goldman notes this largely reflects the sector's outsized benchmark weight, not active avoidance.
ETFs now make up 5.6% of hedge-fund long portfolios, the highest since the financial crisis; $31 billion in ETF shorts account for 62% of total ETF exposure — funds increasingly use ETFs as hedging tools, not directional bets.
Historically, hedge-fund "rising stars" tend to outperform sector peers in subsequent quarters. This means → whether healthcare, financials, and energy deliver relative returns will be the key test of whether this massive repositioning was right.
Content is for reference only, not financial advice.