market folly

Bank of America Merrill Lynch is out with their latest hedge fund trend report and in it, we see the latest market positioning of various hedge fund strategies. Two weeks ago, we saw that hedgies favored high quality stocks. This past week, hedge funds sold gold and silver while buying copper and adding to their net long stake in platinum. They also added to their crowded long positions in crude oil. Additionally, we see that in forex markets hedgies continued to cover their deep shorts in the euro. Just yesterday we noted that legendary investor Jim Rogers was long the euro. In interest rates, hedge funds were covering some of their 10 year note shorts while adding to their shorts in the longer duration 30 year treasuries.

Given our site's focus on equity hedge funds, let's turn now to exposure levels there. It's no surprise to see many large specs add to their short positions in SPX futures given the large overbought condition of the markets. Additionally, we see that market neutral funds are net short equities here and have below average market exposure. Global macro funds were decreasing their net long US equities exposure while buying emerging markets. Long/short equity funds favor small cap names here, but not as much as they previously did. These hedgies still like high quality stocks and their overall market exposure sits around the historical average at 37.5% net long. However, their high quality tilt has declined recently since peaking back in February at the highest levels in over a year.

Embedded below is Bank of America Merill Lynch's latest hedge fund trend report:



You can directly download a .pdf copy here.

As always, a great overview of the positioning of various hedge fund strategies. Make sure to examine the report all the way through as they examine each fund strategy in-depth separately. If you found this report resourceful, check out past hedge fund exposure levels to compare it to. For more research from BofA, we highly recommend checking out their hedge fund generals list of the most popular concentrated positions amongst hedgies.