Monday, May 27, 2024

Hedge funds profit by more than $10bn as Mag-7 slumps

Short positions against the “Magnificent Seven” group of tech companies generated paper profits of more than $10bn in a week.

Nvidia’s fall was the biggest winner for the industry, with a 13% drop in the week ending 12 April making a $3.2bn profit. Tesla, down 16%, generated a $3bn profit.

The figures from Ortex show the extent to which hedge funds have shifted their bets on the M7, which were a key driver of gains as they rose in 2023.

But hedge funds were among the first to call the latest top in this group. Declines by Microsoft and Apple each generated hedge fund profits of more than $1bn.

Meta, Amazon and Google also created profit by falling in the week.

The April profits follow on from the best quarter since the pandemic in Q1, as the industry achieved a weighted average return of 7.3%, according to Citco.

Equity and multi-strategy funds were the top performers, making 8.5% and 7.6% in Q1, respectively.

But the service provider noted that capital flows were negative, with net redemptions of $4.4bn in Q1, mainly out of the quarter’s winners.

The strong performance, which outweighed the redemptions in Q1, helped push industry assets to a new peak of $4.3bn, according to HFR data.

Read more: Man Group performance gains outweigh outflows in Q1