Hedge Funds Lag S&P 500, Add 3.04% YTD

Oct 1 2012 | 10:13am ET

Hedge funds were up 3.04% year-to-date as of September 26, according to a Bank of America Merrill Lynch estimate, compared to a 13.97% YTD gain by the S&P 500.

Based on investable hedge fund indices, BofAML says convertible arbitrage and event driven funds were the best performers over the monitored period, up 5.58% and 4.99%, respectively. Market neutral strategies were the worst performers, shedding 5.31%.

BofAML analyst Mary Ann Bartels said their models indicate that market neutral funds sold market exposure to 4% net short from 3% net short over the monitored period while equity long/short funds sold market exposure to 17% from 18% net long, well below the 35-40% benchmark level. Macros bought the S&P 500, NASDAQ 100 and commodities; increased their EM and EAFE exposures; and bought 10-year Treasuries, while adding to their U.S. dollar shorts. They also switched to a small cap preference.  

Bartels said an examination of Commodity Futures Trading Commission data showed large speculators bought the S&P 500 and Russell 2000 while selling the NASDAQ 100.

Agriculture speculators sold everything—soybeans, corn and wheat—while metals speculators bought everything—gold, silver, copper, platinum and palladium.

Large energy speculators sold crude, were flat heating oil, bought gasoline and added to their shorts in natural gas. Forex specs bought yen and euro and sold U.S. dollars to a net short for the first time since September 2011. Interest rate speculators sold 30-, 10- and 2-year Treasuries.


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