Sunday, 28 December 2014
Last updated 3 hours ago
Jan 23 2012 | 2:30pm ET
Event driven and equity long/short strategies performed best last week, as hedge funds lagged the S&P 500.
The investible hedge fund index added about 1.07% as of January 18 while the S&P 500 was up 4.01%, according to analyst Mary Ann Bartels in the latest Bank of America Merrill Lynch Hedge Fund Monitor. Macro strategies were the worst performers, adding 0.32%.
Bartels’ models showed market neutral funds sold market exposure to 8% from 10% net long last week. Equity long/short bought market exposure to 26% from 25% net long. “Macros bought USD, held commodities shorts steady, and added to their shorts in the S&P 500, NASDAQ 100 and 10-year Treasury futures. In addition, macros noticeably added to EAFE shorts and partially covered EM.”
Bartels pointed out in an earlier report that the correlation of all hedge fund strategies to the S&P500 has been elevated since June 2010. This, she says, may be partially explained “by the phenomenon of highly correlated stocks with the backdrop of European sovereign crisis and headline risks. However, with uniformly peaking correlation across different strategies, does the evidence suggest that too many hedge funds are chasing too few returns?”
This latest report says data to the end of 2011 shows correlation of macro and managed futures strategies has come back into normal range, although correlation for event driven, market neutral and long/short strategies remains elevated. In an earlier report, Bartels had crunched the data and come to the conclusion that correlation for macro and market neutral strategies follows a roughly eight-year cycle.
The Monitor highlights significant hedge fund moves across asset classes based on Commodity Futures Trading Commission data. Last week, large speculators aggressively bought Treasuries across the board l—30-, 10 and 2-years with 2-years entering a crowded net long.
On the agricultural front, large speculators were selling soybean and corn while adding slightly to their shorts in wheat, according to Bartels. Wheat remains in a crowded net short.
Speculators bought gold, silver, copper and platinum while holding steady palladium. In the energy sector, they bought crude, heating oil and gasoline while partially covering natural gas. Crude oil, says the BofAML report, is in a crowded long.
In the forex markets, speculators added to their record short euro position, held steady USD and marginally sold yen, leaving USD and yen in a crowded long.
Dec 1 2014 | 10:21am ET
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