Hedge Funds Begin to Buy More than They are Selling – First time since October

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By Elizabeth Stanton

March 19 (Bloomberg) — U.S. hedge funds are buying more of the nation’s stocks than they’re selling for the first time since October, while mutual funds and most other investors remain net sellers, according to UBS AG.

In the four weeks ended March 13, net purchases of equities by hedge fund clients of UBS averaged $140 million, according to a March 18 report by David Bianco, the New York-based chief equity strategist at Switzerland’s biggest bank. The inflows into stocks followed 22 straight weeks of outflows.

“Those who are supposedly experts at assessing and managing risk are more confident putting capital to work than they were in October and November,” said Peter Kenny, managing director in institutional sales at Knight Equity Markets LP Jersey City, New Jersey. “That’s an indication that the market has made some constructive moves toward building a base.”

Mutual funds and other long-only investors such as pension funds and insurance companies, so-called because unlike hedge funds they don’t usually engage in short selling to bet on stock price declines, were net sellers of an average $144.8 million of U.S. shares over the same four-week period.

Net buying by hedge funds as the Standard & Poor’s 500 Index rebounded from a 12-year low on March 9 marked a change from investor behavior after stocks fell to their lowest levels of 2008 in November, Bianco wrote. At that time, hedge funds and long-only funds were net sellers.

Health-care, consumer and industrial companies were the biggest recipients of inflows from hedge funds, which were net sellers of financial and energy shares. Long-only funds were also net buyers of consumer shares and net sellers of financials. They were net sellers of health-care and industrial stocks, and net buyers of technology companies.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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