Hedge funds have significantly increased positions in banks, insurance, and consumer finance companies, marking the fastest pace of buying in three months, according to a report by Bloomberg citing a research note from Goldman Sachs.
The surge in activity comes amid expectations of heightened dealmaking, potential profit growth, and regulatory easing. European banks have surged more than 40% this year, while US banks have risen just over 20%. North America and Europe accounted for most of the long positions, with financials being the second-most purchased sector after tech, Goldman Sachs said.
Gross leverage among hedge funds rose sharply – the largest increase in eight months – highlighting a renewed willingness to take on risk. Analysts note that while banks generally benefit from higher interest rates, recent Federal Reserve rate cuts have already been priced into the market. Goldman also cited a busy pipeline of IPOs, expected to drive further trading activity.
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