New York (HedgeCo.net) – The choppy, range-bound market has taken a toll on investors and it looks as if hedge funds are becoming more defensive with their portfolio allocations as a result.

According to a recent article from Forbes, Goldman Sachs analyzed the portfolios of 833 equity oriented hedge funds and what the analysis showed is that the funds are becoming defensive for the first time since 2011. It is a classic case of sector rotation as the managers are cutting back on allocations to energy, materials and technology and increasing allocations to sectors such as consumer staples, healthcare, utilities and telecom.

Another trend mentioned in the article is that fund managers are shifting their focus to companies that see a significant portion of revenue being generated from within the United States. Currencies have become more volatile in recent months and economies around the globe seem to be weakening as the domestic economy has been stable.

From the Forbes article:
Goldman says, “during the majority of the past five years, the [hedge fund VIP list] has been strongly correlated with cyclical equities. In recent months, however, funds have shifted more defensively as oil and other commodities remained weak and concerns mounted over global economic growth, reflecting the most defensive attributes since 2011.”

Rick Pendergraft
Research Analyst
HedgeCoVest