Hedge Fund Shorting Soars To Highest Level In Three Years

Jul 11 2007 | 8:27am ET

Hedge funds are making big bets against the Standard & Poor’s 500 after a months-long market rally sputtered in June.

A Merrill Lynch report shows that “large speculators” have pushed short interest in S&P500 futures to its highest level in three years. The short bets were valued at some $45 billion for the week ending July 3, according to the Hedge Fund Monitor report authored by analysts Mary Ann Bartels and Shan Hasnat.

By contrast, short interest on the Russell 2000 fell to its lowest level in at least five years, the report said.

In spite of “crowded levels” of shorting, Bartels and Hasnat argue that hedge funds are barking up the wrong tree.

“We view this as a contrary indicator and reading continue to be bullish for stocks,” they wrote in the report.

Short-biased funds were among the top performers in June as they take advantage of a 1.66% decline in the S&P500, according to a pair of major indices. The strategy has otherwise taken a beating this year as the index has soared almost 7% in its first six months.


In Depth

Steinbrugge: Top 10 Hedge Fund Industry Trends for 2017

Jan 3 2017 | 9:03pm ET

Each year, Agecroft Partners' Don Steinbrugge predicts the top hedge fund industry...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

DarcMatter: The Top Trends in Alternative Investments for 2017

Jan 13 2017 | 8:22pm ET

The $7 trillion alternative investments industry is poised for continued growth...

 

From the current issue of

The U.S. Commodity Futures Trading Commission (CFTC) ordered The Goldman Sachs Group Inc., and Goldman, Sachs & Co. to pay a $120 million penalty for attempted manipulation and false reporting of ISDAFIX Benchmark Rates, a global benchmark for interest rate products.