Hedge funds were down 2.10% as of June 26, according to the Bank of America Merrill Lynch investable hedge fund composite index.
The S&P 500 was down 1.69% over the same period.
Leverage, as measured by NYSE Margin Debt, rose 35% year-on-year in May, but fell from its April peak of $384 billion. Historically, according to BofAML analyst MacNeil Curry, when leverage has peaked after a 33% or more year-on-year increase, the market tends to peak.
All strategies tracked by BofAML lost ground last month, with merger arbitrage funds turning in the best performance by losing only 0.38%. Equity long short funds performed the worst, falling 2.68%, followed by CTA advisors, down 2.08% month to date.
Curry said their models indicate market neutral funds increased market exposure to 11% net long from 3% net long while equity long/short also raised market exposure to 28% net long from 23%, still below the 35-40% benchmark level.
Macro funds slightly reduced their long exposures to the S&P 500, NASDAQ 100 and commodities, while selling U.S. dollar index and buying 10-year Treasury notes. Overseas, they reduced EM exposure and turned net short EAFE for the first time since April.
Commodity Futures Trading Commission data shows large equities speculators reduced their net long in the S&P 500, NASDAQ 100 and Russell 2000 while agriculture specs bought soybean and sold corn while covering 40% of their shorts in wheat.
Metals speculators, on the other hand, sold everything, reducing their longs in gold, silver, platinum and palladium, and adding to their copper shorts.
Energy speculators sold crude oil and gasoline, added to their shorts in heating oil, but partially covered natural gas.
FX specs sold euros and the U.S. dollar index and partially covered yen shorts. Interest rate specs sold 30- and 2-year Treasuries, but bought 10-year Treasuries.