Equity Long/Short, Event Driven Perform Best Last Week

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.


In Depth

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.