Hedge Funds Own More Stock Than Ever

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Hedge Fund - type of financial institutions. US Dollar texture. 3D illustration.
Hedge Funds - type of financial institutions. US Dollar texture. 3D illustration.

Hedge funds own $1.4 trillion in stocks, according to a Bank of America report. That’s the most ever, surpassing the old record set in 2015, but that isn’t surprising. Two big shockers did jump out of the data, though: which stocks the a hedge fund might buy, and how it buys them.

Hedge funds are buying shares of more small- and medium-sized businesses. At the same time, they’ve sold off some of their holdings in large-cap companies.

Beat the market, or join it

Also, hedge funds are buying exchange-traded funds. Think of ETFs as baskets of stocks crafted by mutual fund managers. Their purpose is to allow middle-class investors to buy shares that they couldn’t otherwise afford. Instead of putting $1,000 into one share of a $1,000 stock, retail investors can put $1,000 into an ETF and get the benefit of owning a little bit of that stock. But they also get the benefit of owning a little bit of every other stock that ETF invests in.

Some Wall Street observers find this odd, and maybe a little disturbing.