BofAML: Hedge Funds Most Short S&P 500 Since November 2011

Sep 21 2015 | 12:34pm ET

Hedge funds are short the S&P 500 to the greatest extent since November 2011, according to data from the latest issue of Bank of America Merrill Lynch’s Hedge Fund Monitor.

The company’s diversified Hedge Fund Composite Index managed a 0.09% gain in the week through September 16, aided by an 0.56% jump in Event-Driven strategies and an 0.59% rebound in Equity Long/Short. These moves were counterbalanced by losses of 0.73% and 0.36%, respectively, in Macro and Convertible Arbitrage.

For the quarter to date, the index was down -2.37% as of Sept. 16, compared to -3.29% for the S&P 500. Despite the performance last week, Event Driven and Equity Long/Short remain the worst performers QTD, down 4.68% and 3.07%, respectively.

BofAML’s models suggest Market Neutral funds have increased market exposure to 1% net long from flat, while Equity Long/Short market exposure has fallen back to 33% net long, a reading just below the 35-40% benchmark. Disinflation expectations have been near 4-year high for Market Neutral strategy since late August. 

Meanwhile, macro hedge funds reduced their short positioning in S&P 500, NASDAQ 100 and Commodities, and decreased their net long in USD. They sold 10-year Treasury bonds to a net short for the first time in three months, increased shorts in EAFE and trimmed long positions in emerging markets. Macros also switched to a small cap preference for the first time since June.

CFTC data for the week showed hedge fund capital moving across asset classes. Equity hedge fundes increased their short positioning in the S&P 500, but reduced their shorts in NASDAQ 100 and Russell 2000. Net short notional in S&P 500 contracts stood at $17.4 billion - the highest since Nov. 2011.

In agriculture, large specs decreased their net long positions in soybeans, increased their long positioning in corn, and maintained their shorts in wheat.

In metals, they reduced their net long in gold, silver & platinum, decreased their shorts in copper, and maintained their net long in palladium.

In energy, large specs increased long positioning in crude oil, reduced their long in casoline, decreased their short in natural gas, and increased short in heating oil.

In FX, hedge funds increased net short positioning in EUR and JPY, but reduced their shorts in AUD, GBP and MXN last week.

In interest rates, large specs increased their net short in 30-year and 10-year Treasuries, and continued to reduce their long positioning in 2-year notes.

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