Hedge Funds Lag S&P 500 MTD

Jun 23 2014 | 1:27pm ET

Hedge funds lag the S&P 500 Index month to date, with the Diversified Investible Hedge Fund Composite Index up 0.8% to the broader index's 1.7% as of June 18.

Event-driven funds performed the best, said Bank of America Merrill Lynch analyst MacNeil Curry, adding 1.2% over the monitored period.

Curry said BofAML models indicate market neutral funds trimmed their market exposure to 10% net long from 17% net long while long/short funds trimmed their exposure to 43% net long from 50% net long, above the 35-40% benchmark.

Macro funds cut their long exposure to the S&P 500 and the NASDAQ. They also decreased their long exposure to the U.S. dollar and commodities. At the same time, they increased their short exposure to 10-year Treasuries, decreased their large-cap tilt and, overseas, reduced their short exposure to EM.

Commodity Futures Trading Commission data shows large equities specs cut their S&P 500 and Russell shorts while adding to their NASDAQ longs. Curry said technicals are bullish S&P 500 and NASDAQ while the moving average aggregate indicator suggests a coming reduction in S&P 500 and  Russell shorts.

Large metals specs increased their gold and silver longs and added to their copper shorts over the monitored period while also cutting their platinum longs. Curry said the MAA suggests there will be additions to gold and silver longs but technicals warn both are near the topping zone.  

Large energy speculators added to their crude and gasoline longs and their natural gas and heating oil shorts. MAA and technicals both predict buying of crude and gasoline. natural gas is near the topping zone and MAA also suggests further addition to shorts, said Curry.

FX specs increased their euro shorts while trimming their yen shorts, adding to their British pound longs and cutting their Mexican peso longs. MAA suggests further euro shorts and a reduction in Mexican peso longs while technical analysis recommends remaining bearish the euro, said Curry.

Agriculture specs cut their soybean, corn and wheat longs. MAA and technicals recommend remaining bearish wheat.  

Interest rate specs trimmed their 2-year Treasury positioning to a net short and increased their 10-year shorts. Technical analysis, said Curry, suggests 2-year Treasuries may be near topping.  


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