US Weekly Kickstart Hedge funds and mutual funds differ on AI but converge on Financials

Portfolio Strategy Research 21 August 2026 | 5:37PM EDT

Hedge funds and mutual funds differ on AI but converge on Financials

n This week we published our Hedge Fund Trend Monitor and Mutual Ben Snider | Fundamentals reports, which analyze $10 trillion of equity positions at the start Goldman Sachs & Co. LLC

of Q3 2026. In today’s note we compare the performance and positioning of the Ryan Hammond | two groups. Goldman Sachs & Co. LLC

n Hedge funds and mutual funds have generated solid returns this year despite Daniel Chavez | the lackluster performance of the most popular holdings. 42% of large-cap Goldman Sachs & Co. LLC mutual fund are outperforming their benchmarks YTD, above the historical Kartik Jayachandran average of 37%. US equity long/short hedge funds have returned +10% YTD, | according to data from Goldman Sachs Prime Services. However, our Hedge Fund Goldman Sachs & Co. LLC

VIP basket (GSTHHVIP) and our Mutual Fund Overweight basket (GSTHMFOW) Christophe Sung | have each lagged the equal-weight S&P 500 as well as baskets of underweights Goldman Sachs & Co. LLC and concentrated short positions. n Hedge funds and mutual funds carry equity exposures that are below recent peaks but above historical averages. Mutual fund cash balances registered 1.2% of assets at the end of June compared with the record low of 1.1% reached in December 2025. Hedge fund net leverage ranks in the 27th percentile versus the past 12 months but in the 62nd percentile vs. the past 5 years. n Hedge funds remain more exposed to the AI trade than mutual funds. However, both groups selectively adjusted exposures to AI-related equities last quarter. Mutual funds bought shares in AMD, MU, and SNDK while hedge funds sold those stocks. BE, FLEX, and STX rank among the AI stocks bought by both hedge funds and mutual funds. n Both hedge funds and mutual funds are now overweight the Financials sector for only the 3rd quarter in our historical data. Large-caps bought by both groups include COF, CPAY, FISV, and IBKR. Outside of Financials, both groups of investors also carry large overweights in Health Care but differ with regard to the consumer sectors. n There are six “shared favorite” stocks that register as popular holdings in both hedge fund and mutual fund portfolios this quarter: BA, COF, MA, SPCX, TMO, V. A rolling portfolio of shared favorites has returned 29% YTD, outperforming the equal-weight S&P 500 (16 %) and the most popular positions of each group of investors.

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Goldman Sachs US Weekly Kickstart

Conversations we are having with clients: Comparing mutual fund and hedge fund positioning

This week we published our quarterly Hedge Fund Trend Monitor and Mutual Fundamentals reports, which analyze holdings at the start of Q3 2026. Our analyses cover 991 hedge funds with $5.4 trillion of gross equity positions and 504 large-cap active mutual funds with $4.6 trillion in equity assets.

Hedge funds and mutual funds have generated solid returns this year despite the lackluster performance of the most popular holdings. 42% of large-cap mutual funds are outperforming their benchmarks YTD, above the historical average of 37%. However, our basket of the largest Mutual Fund Overweights (GSTHMFOW) has returned just 9% YTD, lagging both the equal-weight S&P 500 (16%) and our Mutual Fund Underweight basket (GSTHMFUW, 24%). Similiarly, GS Prime Services estimates show US equity long/short hedge funds returning +10% YTD through August 20, with our Hedge Fund VIP basket of the most popular long positions (GSTHHVIP) returning 12% YTD while a basket of concentrated shorts (GSCBMSAL) has returned 38%.

Exhibit 1: 42% of large-cap mutual funds are Exhibit 2: US equity hedge funds have returned 10% YTD outperforming their benchmarks as of August 20, 2026

80% 75% Most concentrated shorts 38% Share of mutual funds 70% outperforming benchmarks Russell 2000 21% YTD 60% NASDAQ 100 16% Historical average 50% 46% Equal-Weight S&P 500 16% 43% 40% S&P 500 12% 34% 32% 30% Hedge Fund VIP Basket…