Stocks that have been hedge fund favorites turned losers on Wednesday sell-offs, reports Bloomberg. The ETF tracking hedge-fund preferences are already down since October, eliciting reactions of forced selling to cover losses.
- The Goldman Sachs Hedge Industry VIP ETF, tracking their most-popular stocks, headed for the worst day since October on Wednesday
- Ark Innovation ETF, which surged about 150% last year, dropped about 4.7% on Wednesday before recovering.
- Invesco Solar ETF, which nearly tripled in the second half of 2020, lost 4% on Wednesday.
- Hedge funds are under pressure as retail traders charged into heavily shorted names, fueling squeezes in stocks such as GameStop Corp. and AMC Entertainment Holdings Inc.
- Already, the gross leverage, which gauges hedge-fund risk appetite, taking into account long and short positions, experienced the largest active reduction on Monday since August 2019
- Most-shorted stocks, nonetheless, surged on Wednesday, with Goldman Sachs basket of such stocks jumping 10%, after a 54% January rally, a record monthly gain.
ETFs tracking hedge fund’s popular stocks are currently declining. GVIP is down 2.29%, ARKK is down 0.99%, TAN is down 3.66%