Earlier this week, in one of the dailies, I included a chart depicting record hedge fund crowding. A few readers asked for additional context.

The visual was from Goldman’s quarterly hedge fund monitor. In the latest installment, covering Q3 and published this week, the bank analyzed holdings across 735 funds with nearly $2.5 trillion of gross equity positions ($1.6 trillion long and around $800 billion short).

I wouldn’t call these reports “must read” material exactly, but as sell-side research goes, they count as entertaining.

One of the key takeaways from the latest edition was that the bank’s “crowding index” hit a record high. That was due to high concentration across funds and outperformance from popular stocks.

“Mirroring the increasing concentration in the equity market, concentration in hedge fund portfolios has risen; the typical hedge fund holds 70% of its long portfolio in its top 10 positions,” Goldman’s Ben Snider wrote, noting that the same dynamics pushed hedge fund exposure to the Momentum factor close to a record.

Goldman’s Hedge Fund VIP list (the 50 stocks that appear most often among the top 10 holdings of fundamental hedge funds) has returned +31% this year. Not too bad, although you would’ve done quite a bit better with QQQ, and instead of paying two and twenty, you’d pay 20bps.

Note that equity L/S funds are underperforming big US tech by 39ppt and the S&P by 12ppt. That’s… well, it’s not great.

Needless to say, the “Magnificent 7” are heavily represented in hedge fund portfolios. Out of the group, only Tesla doesn’t rank in the top 10 on the VIP list (see below).

Indeed, the big seven’s portfolio weight at the end of Q3 (or the start of Q4, however you want to look at it) was double where it stood at the beginning of the year, according to Goldman, accounting for 13% of long equity portfolios.

Snider cited the bank’s prime desk in noting that hedge fund net exposure to the big seven currently ranks in the 99%ile since 2016, versus just a 12%ile position at the beginning of the year.

Obviously, the 13% figure cited above is well below the weight the “Magnificent 7” commands in the S&P (nearly 30%) and the Russell 3000 (25%). So, while hedge funds upped the weight of the mega-caps to a record, relative to broad equity indexes, they’re underweight.

As the figure on the right (above) shows, hedge funds added to positions in the mega-caps on net during Q3, with Microsoft seeing (by far) the biggest increase in ownership across funds.

For reference, the new VIP list is below.