BofAML: Equities Funds Sharply Reduce Market Exposure

May 28 2013 | 12:15pm ET

Equities-focused hedge funds markedly reduced their market exposure as of May 22, according to the latest Bank of America Merrill Lynch Hedge Fund Monitor.

BofAML analyst Stephen Suttmeier said market neutral funds reduced market exposure to 6% from 16% net long over the monitored period while equity long/short funds reduced market exposure to 32% from 41% net long; below the 35-40% benchmark level.

Macro funds partially covered their shorts in the S&P 500, NASDAQ 100, commodities and Treasury notes while reducing their net-long positions in EM and EAFE and maintaining a large-cap bias. Suttmeier said macro funds also sold the dollar index to a net short for the first time since March 2013.

The investable hedge fund composite index was up 1.45% month-to-date, trailing the S&P 500 which was up 3.62%. Convertible arbitrage and event-driven strategies were the best performers MTD, adding 2.80% and 2.13%, respectively. Market neutral strategies were the worst, shedding 0.67%.

Commodity Futures Trading Commission data showed large speculators sold the S&P 500, bought the Russell 2000 and were flat the NASDAQ 100 over the monitored period.

Agriculture specs bought soybeans, sold corn and increased their wheat shorts to levels not seen since May 2012. Metals specs, meanwhile, sold gold, silver and platinum; slightly bought palladium; and partially covered copper shorts.

Energy speculators bought crude oil and gasoline but added to their shorts in heating oil and natural gas. Large FX specs increased their euro and yen shorts while adding to their US dollar index longs while interest rate specs sold 30- and 2-year Treasuries while buying 10-years.


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