Hedge Fund Leverage At 2007 Levels

May 7 2013 | 9:32am ET

Current levels of both net free credits and margin debt indicate hedge funds are “extremely bullish” on equities, says analyst Stephen Suttmeier in the latest Hedge Fund Monitor from Bank of America Merrill Lynch.

Hedge fund leverage (as measured by NYSE Margin Debt) rose 28.3% year on year in March to $380 billion and is creeping toward its 2007 peak of $381 billion. And hedge funds' cash balances in margin accounts plummeted to a negative $92.2 million in March—the lowest level since 2000.

Suttmeier says their models indicate market neutral funds bought market exposure from 7% to 10% net long, the  highest since June 2012. Equity long/short bought market exposure to 41% from 40% net long, above the 35-40% benchmark level. Macros continued to add to their shorts in risk assets including the S&P 500, NASDAQ 100 and commodities. In addition, they added to their shorts in 10-year Treasuries, while slightly selling US dollars and adding to their long positions in EAFE and short positions in EM.

Commodity Futures Trading Commission data shows large equities speculators bought the S&P 500, the NASDAQ 100 and the Russell 2000 while agriculture specs bought soybean and corn and halved their shorts in wheat.

Metals speculators sold gold and silver, bought platinum and palladium, and partially covered copper. Energy specs bought crude oil, partially covered heating oil, were flat natural gas and sold gasoline.

Foreign exchange speculators sold U.S. dollars while partially covering euro and yen. Interest rate spcs aggressively bought 30-year Treasuries, bought 10-year Treasuries, and sold 2-year Treasuries.
 


In Depth

Q&A: High Conviction, Low Correlation

Oct 30 2014 | 7:35am ET

Acadian Asset Management's numbers are big: over $70 billion in assets under management...

Lifestyle

Ex-Hedgie Steyer Gives $56M To Climate Action Super PAC

Oct 28 2014 | 9:23am ET

Retired Farallon Capital founder Tom Steyer has poured almost $56 million into his...

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

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

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.