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: Jeff Eaton Talks Capital Raising, CalPERS And The Secondaries Market

Oct 14 2014 | 10:16am ET

Global placement agent Eaton Partners has raised close to $60 billion for some of...

Lifestyle

MacDonald-Korth Offers Insights Into Paintings Bought, Sold By Hedgies

Oct 7 2014 | 9:00am ET

Definitive and complete ratings require an in-person examination of an artwork,...

Guest Contributor

PAAMCO: European Equity Exposure - Challenging Year, But All is Not Lost

Oct 16 2014 | 4:12am ET

European equity hedge fund managers have had a tough time so far this year. The...

 

Videos

Editor's Note

    Must Attend Hedge Fund Charity Events For October

    Sep 30 2014 | 9:29am ET

    The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. 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.