Hedge funds bought financial stocks amid banking turmoil, says S&P

By Carolina Mandl

NEW YORK (Reuters) – Hedge funds increased their exposure to stocks in the financial sector amid the banking turmoil in March, as they saw a buying opportunity at lower prices, S&P Global Market Intelligence said in a note on Thursday.

“Hedge funds used the bank stress as an early buying opportunity, dismissing speculation that a significant crisis was at play,” S&P said, adding the firms boosted their exposure to financials by 5.5%, after having reduced it by 3.9% in February. Retail investors also increased their bets by 1%.

Hedge funds raised their exposure to financials more than any other sector, according to S&P, which tracks assets listed in the U.S.. Hedge funds added $13.5 billion in stocks in all sectors in March.

Hedge funds‘ positioning in the banking sector came in a month when U.S. banks Silicon Valley Bank and Signature Bank failed, followed by Credit Suisse’s rescue.

“The group saw an opportunity to pick up banking names at a significant decline and, in order to do so, sold down holdings in the better-performing materials and energy sectors,” Christopher Blake, executive director of S&P Global Issuer Solutions wrote.

Citadel, one of the worlds most profitable hedge funds, said in March in a regulatory filing it bought a 5.3% stake in Western Alliance Bancorporation, which was seen as a sign of confidence in the battered sector.

Traditional asset managers, another group of investors tracked by S&P, cut their positioning in financials by 1.1% and also slashed $20.2 billion in equities stakes across other sectors.

Overall, the financials sector has not recovered from the losses. The KBW Bank Index and the S&P 500 Banks Index are down 18.6% and 12.9% year to date, respectively, and both are roughly flat in April.

(Reporting by Carolina Mandl in New York; Editing by Sonali Paul)