Hedge funds are betting on banks, insurance and real estate, Goldman Sachs says

By Nell Mackenzie

LONDON (Reuters) – Hedge funds continued to bet against bank and financial stocks in the week to Friday, Goldman Sachs said in a note seen by Reuters on Monday, amid reports of job cuts and a reduction in deal activity.

Financial stocks ended the week as the biggest net-selling sector at Goldman Sachs’ brokerage unit, which handles global hedge funds, the note said.

Shares of banks, insurance companies, publicly traded real estate funds and capital markets firms that allow people to buy and sell bonds and stocks were net sellers for the fourth straight week.

A short position is based on the assumption that the value of an asset will decline, while a long position is based on the assumption that it will increase.

Europe’s STOXX 600 banking index is up 1.7% since Aug. 26, while the Dow Jones banking index closed Friday up more than 2% in the week leading up to Monday’s U.S. holiday.

Financial sector stocks have been sold in six of the last seven weeks, according to a Goldman Sachs note.

The sale was global, with North America expected to be the leader, as well as emerging markets in Asia and Europe, the memo said.

LSEG data shows that while the total value of deals globally rose by about a fifth, the number of mergers and acquisitions fell by 25% in the year to June 25.

Hedge funds made small net purchases in the consumer finance sector, according to a Goldman Sachs note.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Hugh Lawson)