Hundreds of mutual funds and hedge funds overlap in their investments, creating some shared favorites between the two different investment vehicles, according to Goldman Sachs. The firm published two reports last week which looked at several funds’ holdings at the end of the first quarter of this year, specifically analyzing 707 hedge funds with $2.7 trillion of gross equity positions and 482 mutual funds with $3.3 trillion of equity assets under management. Among their positions, seven shared favorites emerged across sectors including financials, technology and health care. This basket of stocks—which includes Danaher , Mastercard , Vertiv and Uber —are constituents of both Goldman’s Hedge Fund VIP and Mutual Fund Overweight baskets. Since 2013, these shared favorites have outpaced the S & P 500 in 64% of all months, with an annualized outperformance of 3 percentage points. “Hedge funds and mutual funds have boosted exposures to equities this year, with hedge fund net leverage rising near its highest level over the past year and mutual fund cash balances dropping to record lows. In addition to higher equity exposures, funds have also begun to raise their exposures to pockets of the market that represent the next phases of the AI trade,” Goldman’s chief U.S. equity strategist David Kostin wrote in a note Friday releasing the list. Hedge funds and mutual funds both added to equity positions alongside the year’s more than 10% rally in the broad-market index, Kostin added, noting that both kinds of investor groups increased their exposures to the utilities sector to new highs, reflecting enthusiasm about artificial intelligence-related beneficiaries. They also maintained pro-cyclical exposures. Inside the basket, data center equipment firm Vertiv has the highest year-to-date performance. The company has been touted as an alternative way to invest in the booming development of AI-related data centers, as its liquid cooling offerings could make it a key beneficiary of the transition to liquid from air cooling technologies in an effort to increase energy efficiency. Shares have soared almost 92% this year, and have about 11% upside to the average analyst price target, according to FactSet. KKR has the second-highest performance in the group, as the stock is up more than 22% this year. Shares could climb about 16% over the next year, according to its consensus price target from analysts surveyed by FactSet. Goldman analyst Alexander Blostein in a May 15 note said KKR should deliver faster fee-related earnings (FRE) in both 2024 and 2025. FRE is a metric that measures a company’s underlying profitability based on management fees, excluding investment income. Two other financials, payments companies Visa and Mastercard, are also among the favorite shared stocks. Visa shares are up about 4.6% for the year, lifted by stronger-than-expected earnings in the fiscal second quarter. Mastercard has added 4.3%, meanwhile. Both stocks have had a tough quarter, however, with Visa falling 2.4% since the end of March, while Mastercard shares have lost 7.6%. FactSet’s average analyst price target suggests roughly 14% upside for Visa and 16% Mastercard, respectively, over thre next 12 months versus Tuesday’s close.
