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Thursday, March 28, 2024

Hedge Funds Crushed By Surge In Moderna, The Third Most Shorted Name

Courtesy of ZeroHedge View original post here.

Over the weekend, we reported that even before last Fridat's bloodbath, hedge funds suffered their worst week in six months because according to Goldman prime, the GS Equity Fundamental L/S Performance Estimate fell -1.57% between 11/19 and 11/25, driven by alpha of -1.12% which was "the worst alpha drawdown in nearly six months" and beta of -0.45% (from market exposure and market sensitivity combined).

So it probably won't come as a big shock that the worst Black Friday market crash in history did not reverse the ongoing woes of the 2 and 20 crowd, and once again failed to validate the "hedge" in "hedge fund" because according to Goldman prime, many hedge funds were again caught off-guard by news of the variant as they had bought US Go Outside (reopen) stocks and sold Stay-at Home names in the past week.

Additionally, updated 13F data showed that mutual-funds are carrying sizable underweights coupled with large short positions in the vaccine names (particularly MRNA, which is the 3rd most shorted name, but also PFE).

As Goldman's heatlhcare analyst Asad Haider points out as it relates to the vaccine names, Friday’s episode (MRNA +21%, PFE +7%) "highlighted the sensitivity oft hese stocks to a still fluid virus situation which could lead to some reassessment of the magnitude of the underweights in these names that is worth carrying particularly if the “duration to cliff” gets extended." Of note, MRNA is up another 10% in today, extending Friday’s massive rally, on comments that their reformulated vacccine for Omicron could be ready in early 2022.

Haider also notes that from a healthcare investor perspective, the price action this past Friday on the back of the Omicron macro shock was "textbook Covid-on”, amplifying sharp rallies across the vaccines (MRNA, PFE, BNTX, NVAX) and testing complexes(DGX, PKI, DHR, HOLX) and sharp selloffs in both cyclical/reopen proxies, which Medtech bore the brunt of (BSX, SYK, EW, ZBH), and in risk proxies (which the XBI and SMID biotech, again, bore the brunt of).

That said, the extent of whether this was too excessive of a repricing remains to be seen, though it’s worth noting that illiquid markets, lopsided positioning and lack of information on Omicron have been a factor.

And while we wait, anyone who still is debating whether to have their money to be managed by a "professional" money manager charging an astronomical 2 and 20 (for underperforming the S&P for 11 years running), or by their basement dwelling teenager, the following chart has the answer.

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