With more than $6 trillion of assets under management, the world’s 50 largest hedge funds control as much wealth as the GDP of the United States’ 25 smallest states combined.
So when hedge funds take long positions in securities, it’s worth paying attention to who they are backing, and why.
Hedge funds tend to deal with high net worth investors only, as the instruments they invest in are often quite sophisticated, making use of derivatives and leverage, and are also less regulated than more traditional funds.
Still, a hedge fund’s holdings are a useful bellwether for less experienced or amateur investors, as they are run by some of the world’s richest and most successful stock pickers; the likes of George Soros, for example, the “sage of Omaha”, Warren Buffet, Carl Icahn and Ray Dalio.
Of course, they are not always right, but often enough that the 25 richest hedge-fund managers made in excess of $11 billion in 2016 alone.
Wallet Hub has just released a report analysing hedge fund holdings across Q3 2017 in the US, based on the quarterly public disclosures that hedge fund managers are obliged to make to the Securities and Exchange Commission.
The most popular holdings across the 400 hedge funds that Wallet Hub include in their report will quite possibly surprise nobody; anyone with a casual interest in the markets could probably reel off the top 5; Microsoft, Apple, Amazon, Facebook, and Alphabet (owner of Google).
In truth, there are few surprises; perhaps Visa, in 8th place, is a little unexpected, and Johnson & Johnson, The Boeing Company and Wells Fargo also make the top 25 – with Netflix sneaking in also at no. 24.
What 3 stocks do the world’s richest hedge fund manager like the most?
And now for the juicy part; WalletHub have created an infographic revealing the top 3 holdings of 12 of the world’s richest, canniest, most successful, and best-known hedge fund managers – because as WalletHub points out, some of these men (sadly, there are no women featured in the infographic – note to WalletHub, add some for next time, please) are now celebrities in their own right.
The infographic, reproduced in full below, makes for fascinating reading; Warren Buffet, the world’s second richest man, has a bigger holding in Kraft foods than he does in Apple. Ray Dalio, the Bridgewater investor who doesn’t believe in bitcoin, is backing The Kroger Co. a sustainable wild-caught, farm-raised seafood company, and selling Intel Corp.
David Einhorn, “only” the world’s 1,376th richest person, holds more General Motors stock than any other, whilst Julian Roberston, the world’s 474th richest, holds more Adobe stock than he does Facebook and Microsoft.
Of course, and as we mentioned before, these “rockstar” investors purchase stocks for very different reasons to everyday investors seeking alpha. Hedge fund managers are powerful enough to move markets when they buy and sell – and are near-constantly engaged in an elaborate game of smoke and mirrors with other funds, institutional investors, and in George Soros’ case, even governments -sometimes entire continents!
So please don’t take the below as a series of investment recommendations, merely as something to make you pause for thought.
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