Analysts at Barclays said in a research note that hedge funds emerged as dip buyers throughout the first quarter earnings season, while systematic funds rebuilt equity longs post-April sell-off with room to add further.
Elsewhere, the bank revealed that long-only equity exposure is no longer historically extended, retail investor sentiment is on the rise, mutual funds stay heavily overweight big tech while hedge funds lean cyclical.
"The April sell-off reset the extended equity positioning of long-onlys from a post-COVID record to a level slightly below the LT median," said the bank. "The catalyst was macro jitters tied to slowing growth and sticky inflation with a healthy dose of technical and systematic de-risking in the mix, potentially leaving equities on stronger fundamental footing after a solid 1Q24 earnings season."
Accordingly, Barclays notes that hedge funds showed more resilience with no signs of capitulation in reaction to last month's stagflationary scare.
"In fact, we believe better-than-expected earnings appear to have motivated dip buying by hedge funds, especially in the equity futures market," added the bank.