BOFAML: Hedge Funds Go Net Short S&P, Buy Gold, SIlver & Oil

Apr 6 2015 | 12:37pm ET

Hedge funds moved to a net short position in the S&P 500 while buying gold, silver and oil, according to the Bank of America Merrill Lynch Hedge Fund Monitor for the week ending April 3.

The diversified hedge fund index was up 2.0% in the first quarter, compared to 0.4% in the S&P 500 on a price returns basis. CTAs lead the pack, up 5.5% while Event Driven funds posted the lowest gain, up 1.4%.

BofAML said that market neutral funds exposure decreased to 1% net long from 2% net long. Equity Long/Short market exposure increased to 33% net long from 30% net long, sill below the 35-40% benchmark level. 

Macro hedge funds, meanwhile, increased their long S&P 500 and NASDAQ exposure while decreasing their EAFE exposure. They also lowered long bets on the dollar and increased exposure to rising 10-Year Treasury bonds. They maintained their short Commodities exposure and further increased their short positions in Emerging Markets. 

Commodity Futures Trading Commission data for the week shows hedge fund action across asset classes. Large specs increased their net long positioning in gold, while adding to their net long position in silver contracts at the strongest pace in more than six months. Technicals suggest the buying should continue.

Energy specs bought crude oil contracts after five weeks of selling. The speculative net long position remains close to the smallest in three years as technical indicators suggest the downtrend is close to basing. 

Large equity speculators decreased their net position in the S&P 500 Index from $1.1 billion notional long to net short $0.2 billion, and pared the $5.1 billion net long position in the NASDAQ 100. Specs also increased Russell 2000 net short positions after two weeks of heavy buying. Technicals recommend remaining bullish.

FX specs sold euro contracts to increase their net short position to the largest in more than two years, while also decreasing net short positions in the Japanese yen to the smallest in two years. BofAML’s technical indicators suggest net short positioning in the euro may be at risk.

Interest-rates specs bought 2-year contracts for a fourth consecutive week to increase net long positioning to the largest in two years, while Agriculture specs sold wheat contracts increasing net short position to the largest in more than a year. 

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