BofAML: Hedge Funds Net Short Gold, Build Record Short Position in Silver

Jul 27 2015 | 6:09pm ET

Hedge funds have gone net short on gold for the first time since 2006, according to the latest Bank of America Merrill Lynch Hedge Fund Monitor.

BofAML noted that it was the first time since it began collecting data that money managers have an aggregate net short position in the yellow metal. They also hold a record short position in silver, the firm noted. 

The investable hedge fund index was up 0.51% month-to-date as of July 22, outperforming the S&P500’s +2.47% on a price returns basis. Macro and CTA Advisors did the best, up 2.60% and 2.58%, respectively, while Event Driven’s -0.75% is the worst of the group for the period. Merger Arb is slightly down, at -0.15%, while Convertible Arb is essentially breakeven at -0.04%, again all month-to-date. 

For the week, CTA’s and Macro managers did the best, up 0.90% and 0.63%, respectively. Year-to-date, Merger Arbitrage leads the pack, up 3.99%, while CTAs bring up the rear at 0.22%.

Last week saw broad risk-off as treasury performed the best among the indices BofAML monitors, the report said. Meanwhile, broad selloffs occurred in US equities, Agriculture, Metals and Energy. The data showed the net positioning of large speculators as a percentage of total open interest nearing 3-year lows in Silver, Gold and Gasoline. 

BofAML said that market neutral funds market exposure increased to 19% net long from 15% net long. Equity Long/Short market exposure decreased to 54% net long from 59% net long, which is still above average. 

Macro hedge funds, meanwhile, reduced risks across the board but decreased their long exposures in S&P 500, NASDAQ 100, EM, Commodities and 10-year Treasuries. They added to their crowded long in USD and sold EAFE to a net short. 

CFTC data for the week showed hedge fund capital moving across asset classes. Equity hedge funds reduced their short positioning in the S&P 500 and Russell 2000, and notably increased their long position in NASDAQ 100. 

L/S equity funds switched to large cap preference from size neutral, tilted further towards growth and low quality, and reduced disinflationary expectations, BofAML’s analysis showed. 

In agriculture, specs continue to increase their net long positions in soybean and corn, and slightly reduced their long positioning in wheat. 

In metals, specs reduced their net long positioning in gold, silver and palladium, maintained their long exposure in platinum, and increased their shorts in copper. 

In Energy, specs reduced their long positioning in crude oil, decreased their shorts in natural gas, but continued to buy Gasoline and Heating Oil.  

In FX, specs increased their net short positioning in EUR, JPY, AUD and MXN, but partially covered their short exposure in GBP. 

In interest rates, specs bought 10-year Treasuries to reach a net long position from net short, and largely held steady their long positioning in 30-yr and 2-yr. 

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