Goldman Sachs Group Inc (NYSE:GS) Hedge Fund Trend Monitor, a quarterly round-up of 13-F filings and hedge fund trends, was published this week.

The report analyzes 833 Hedge Funds with $2.1 trillion of gross equity positions -- $1.5 trillion long and $684 billion short) based on 13-F filings as of August 15, 2015.

Based on the analysis of hedge fund holdings, Goldman's research showed that Hedge Funds are more likely to use ETFs as hedging tools than as directional investment vehicles. The use of ETFs primarily as a hedging method runs contrary to the wider investment community. Indeed, ETFs are increasingly becoming the investment vehicle of choice for investors looking to make a low-cost, diversified directional bet on the market.

Nevertheless, Goldman's research shows that ETFs represent just 1.7% of hedge fund longs, down from nearly 6% in 1Q 2009 and the lowest overall percentage holding since 2007. Based on 13-F research, hedge funds hold an estimated $156 billion in gross exposure to ETFs, compared with $2 trillion of gross exposure to single stocks.

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Hedge fund ETF positioning

Hedge fund ETFs exposure

Of the total $156 billion in gross ETF exposure, 84%, of $131 billion is short ETF positions compared to single stock exposure, where 28% of gross single-stock exposure is short. Most of the ETFs owned by hedge funds track an underlying equity index or sector, acting as a hedge against market movements. Aside from sector and index hedges, commodity funds, bond funds, and Emerging Market ETFs make up the majority of ETFs used by hedge funds.

Overall, ETF short interest increased over $13 billion during the second quarter with the majority of the increase attributable to position changes in the SPDR S&P 500 ETF. One thing to note with these ETF holdings, and Goldman's analysis of the 13-F reports, in general, is that hedge funds are not required to report foreign holdings in their 13-F filings. Consequently, the research does not capture all long equity positions. What's more, short data is only available for publically disclosed short positions as disclosed by the exchanges. Only US broker-dealers are required to report short positions to exchanges, so any short positions held in overseas accounts are not disclosed.

See the full list of hedge fund ETF holdings below.

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Hedge fund ETF positioning