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Hedge Funds Are in Love With Small-Caps Again 

June 20, 2017

Lu Wang, Bloomberg

"The violent rotation gripping U.S. equities has chased professional investors back into small-cap stocks.

In just two weeks, hedge fund positioning in Russell 2000 Index mini futures went from the most bearish in six years to the most bullish in four months. It’s the biggest about-face on record, according to Commodity Futures Trading Commission data compiled by Bloomberg that goes back to 1994.

While the reason for the flip-flop is hard to pinpoint, it’s mirroring a larger reallocation across U.S. stocks that has sent bank shares up in seven of the last nine days and lifted other sectors that rose in the aftermath of President Donald Trump’s election. Financial firms dominate the small-cap universe, making up almost a third of the Russell 2000 Index, almost twice the share as in the S&P 500."

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