Active managers‘ holdings update: Disagreement, diversification, disruption & other drama

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Active managers‘ holdings update: Disagreement, diversification, disruption & other drama

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Active managers’ holdings update

Disagreement, diversification, disruption &

other drama

Alpha from arguments: defensive LOs vs. cyclical HFs 15 July 2026

Long Only managers (LOs) and Hedge Funds (HFs) have continued to diverge: LOs’ Equity and Quant Strategy

cyclical vs. defensive exposure by sectors is at record lows, HFs at record highs. Over the United States

last three months, LOs increased their exposure to Staples (20% UW from 28% UW) and

Health Care (15% OW from 9% OW), while cutting exposure to Tech (2% UW from 1%

OW) and Industrials (12% OW vs. 16% OW). But HFs added to Industrials (+79% net long

vs. +59% prior), while fading Staples (-2% vs. +48%) and Utilities (-59% vs. -26%, now

the most shorted sector). HFs bought Financials (+34% today vs. -4%) while LOs sold

(12% UW from 9% UW). When LOs are buying and HFs are selling, sectors lag over the

next 3 months by -1.5% in 66% of cases historically. Sell defense, buy offense.

Savita Subramanian

Equity & Quant StrategistDiversification hurts, until it doesn’t BofAS

2026 saw the biggest Russell index rebalance by dollar amount, leaving fewer stocks in the Russell +1 646 855 3878

Growth benchmark than ever, causing large rebalancing flows and driving correlations between savita.subramanian@bofa.com

the average stock and the S&P index to historical lows of 0.11 (Exhibit 7). Outperforming the Nicholas Samoyedny, CFA Equity & Quant Strategist

benchmark while maintaining diversification has become increasingly challenging, particularly for BofAS

Growth managers facing the most concentrated benchmark (see notes; US Mutual Fund nicholas.samoyedny@bofa.com