Morgan Stanley says hedge fund bets on software companies have reached a record high

Global hedge fund exposure to U.S. software stocks hit a “new multi-year low” last week after a broad sell-off in the technology sector, Morgan Stanley said in a note.

“Software has been selling more, extending the streak of net sales in this area since late April and hitting new multi-year lows,” the bank said.

The rally in stocks, led by a handful of technology stocks, raised concerns among some investors that the gains could evaporate as sentiment around them changes.

Morgan Stanley, which tracks hedge fund flows through clients of its prime brokerage unit, said portfolio managers were net sellers of stocks last week in the United States, Europe and Asia excluding Japan.

Despite some volatility on Thursday, when data showed U.S. consumer prices fell in June for the first time in four years, hedge funds sold shares every day in the week to June 11.

The S&P North American Technology Software Index fell nearly 2% last week, but is still up 8.8% year-to-date. It includes companies like Adobe, Salesforce, Microsoft and Oracle.

Outside of the technology, media and telecom sectors, hedge funds also sold cyclical stocks that fluctuate in line with the economic cycle.