That’s because most ETFs track an index. If the Dow goes up, the ETF that invests in Dow stocks goes up. If the S&P 500 goes down, the ETF that invests in S&P 500 stocks goes down.
The whole purpose of hedge funds, though, is to not track the market. They’re supposed to beat the market, which is why hedge fund managers get paid so well.
Hedge fund investing in U.S. slows
The Bank of America report also says that hedge funds’ short interest dropped sharply over the summer. Short interest boils down to the amount of money investors bet that stock prices will fall. This means hedge fund managers expect stock prices to keep going up.
This bullish stance might not last, though. While hedge funds have acquired a record value of stock, the pace at which they’re buying more has slowed, according to the report. This includes stocks the hedge funds own through ETFs as well as those they own directly.
The report estimates hedge funds now own 8 percent of all small- and medium-sized businesses’ stock. That compares to the 4 percent of all large-cap stock owned by hedge funds.
