BofAML: CTAs Perform Best In 2014

Jan 6 2015 | 1:28pm ET

CTAs were the top-performing strategy of 2014, adding 15.2% as of December 30 compared to a 0.4% loss for the average hedge fund, according to the Bank of America Merrill Lynch.

Convertible arbitrage funds were the biggest losers of 2014, shedding 9.6% as of end-December.

BofAML analyst MacNeil Curry said market neutral funds trimmed their market exposure from 7% net long to 6% net long while equity long/short trimmed their market exposure from 39% net long to 38% net long, within the 35-40% benchmark level, over the monitored period.

Macro funds increased their long exposure to the S&P 500, maintained their NASDAQ exposure, added to their U.S. dollar long exposure and slightly increased their long exposure to 10-year Treasuries. Overseas, they cut their EM long exposure.

Commodity Futures Trading Commission data shows large equities speculators bought the S&P 500 to the largest net long since July 2013 and reduced their Russell net short position. Curry said the Russell has been bought in 10 of the past 13 weeks. The moving average aggregate indicator suggests the S&P 500 and Russell buying pace may slow; technicals are also negative for the near term.

Large metals specs bought silver contracts to a three-month-high net long. Curry said silver longs have increased for most of the last two months but technicals are bearish. Specs sold copper to their largest short position in over a year. The MAA and technicals indicate copper shorts should continue to increase.

Energy specs sold crude contracts, decreasing their net long positioning further. Crude has been bought in only five of the past 27 weeks since the sell-off began in July. Curry said technicals indicate we're in a “deeply oversold” territory but recommend remaining bearish for now. The MAA also suggests longs will be further reduced.

FX specs sold the euro and the British pounds, increasing both net short positions. The pound was sold for most of Q4 2014. The MAA and technicals suggest net short positioning in both should continue to increase.
 
Agriculture specs bought corn for the fourth consecutive week, increasing their net long position to a six-month high. Corn was bought in 11 of the 13 weeks in Q414. The MAA and technicals suggest corn longs may further increase, said Curry.

Interest rate specs sold 10-year contracts, increasing their net short position to the largest since May 2010. Technicals suggest near-term risk for yields is to the downside, said Curry.


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