In case you were in need of further evidence that 2011 was a bad one for hedge funds, Bank of America Merrill Lynch’s latest Hedge Fund Monitor provides it.
According to Mary Ann Bartels, head of U.S. technical analysis for BofAML, the Global Diversified Hedge Fund Index was down about 4.99% in 2011 and the investable HF index was down about 7.84% while the S&P 500 closed flat.
All strategies had a negative return for 2011. CTA advisors and merger arbitrage performed the best, according to Bartels, down about 0.38% and 2.55%, respectively; equity long/short and macro performed the worst, down an estimated 19.10% and 5.09%, respectively.
Bartels says BofA Merrill Lynch’s models show that market neutral funds bought market exposure to 7% net long at the end of December while equity long/short maintained market exposure at 25% and macros “added to their shorts in 10-year Treasuries, slightly bought USD, marginally covered NASDAQ 100, and held steady their S&P 500, commodities, EM and EAFE shorts.”
The monitor also highlights significant moves across asset classes based on data from the U.S. Commodity Futures Trading Commission. As of January 10, 2012, large speculators were buying soybeans and corn while holding steady their shorts in wheat. In metals, they were buying gold, silver and platinum; partially covering copper; and selling palladium. In energy, speculators were buying energy futures across the board—crude, heating oil, gasoline and natural gas. Crude oil is in a crowded long
As for foreign exchange, the monitor says large speculators added to Euro shorts (resulting in a record short position), aggressively bought Yen to a crowded long while slightly selling USD. The Euro remains in a crowded short and USD stays in a crowded long.