Hedge Funds Dismissed Speculation, Reportedly Used Banking Turmoil In March As Buying Opportunity

Hedge funds raised stakes in financial sector stocks amid the banking crisis in March with lower prices presenting buying opportunities, according to a report that cited an S&P Global Market Intelligence note.

What Happened: “Hedge funds used the bank stress as an early buying opportunity, dismissing speculation that a significant crisis was at play,” S&P said, according to a Reuters report.

The firms increased their exposure to financials by 5.5%, after having trimmed it by 3.9% in February, it said.

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Citadel, which is among the world’s most profitable hedge funds, stated in March that it bought a 5.3% stake in Western Alliance Bancorporation WAL, according to the report.

Hedge funds increased their exposure to financials more than any other sector while they added $13.5 billion in stocks across all sectors in March. However, traditional asset managers reduced their positioning in financials by 1.1% and also cut $20.2 billion in equities stakes across other sectors, the report said.

“The group saw an opportunity to pick up banking names at a significant decline and, in order to do so, sold down holdings in the better-performing materials and energy sectors,” Christopher Blake, executive director of S&P Global Issuer Solutions wrote.

Bank Earnings: Investors and traders are now keenly watching out for the start of the earnings season with big lenders like JPMorgan Chase & Co JPM, Citigroup Inc C and Wells Fargo & Co WFC scheduled to report their results.

Deposit figures would be a key metric that would be in focus following the banking turmoil that saw billions of dollars flow into high yielding money market funds.

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