Mutual fund allocation to FANG stocks (Facebook FB, Amazon (AMZN) , Netflix (NFLX) , Alphabet (GOOGL) ) -- especially Facebook -- has declined during the past few years, points out Goldman Sachs. While core mutual funds have been steadily underweight (negative) FANG, growth funds only recently reduced their exposure to underweight from overweight.
The sharp decline in growth fund allocation to FANG stocks happened in the fourth quarter of 2016, says Goldman, when both Facebook and Amazon lagged the Russell 1000 Growth Index by more than 11 percentage points.
"Most investors believe that mutual funds are overweight the popular FANG stocks, when in fact the opposite is true," reminds Goldman strategist Arjun Menon. On the other hand, hedge funds got blown up on the surprising Facebook news.
"The 19% dive in Facebook's stock price hurt hedge fund returns and our VIP basket given that it appears most often as a top 10 position across our analyzed universe of U.S. hedge funds with 10 to 200 individual equity positions," says Menon.
What Jim Cramer's Action Alerts PLUS member club is saying after Facebook's mixed second quarter.