COVID-19 and hedge fund equity ownership

This study investigates hedge funds equity ownership in light of the COVID-19 pandemic. Using the merged dataset of Lipper TASS hedge funds and the corresponding 13F filings, we find that with the start of the pandemic, hedge funds increased their equity ownership toward firms with less financial constraints, such as larger firms, firms with lower leverage, and more profitability. Moreover, hedge funds increased their ownership in firms which had higher overall risk (political and non-political), and lower overall sentiment. Hedge funds also care about firms' exposure/sensitivity toward different political issues such as health care, technology & infrastructure, and security & defense. This suggests that hedge funds seek equity ownership in riskier stocks as a result of pandemic uncertainties.