Hedge Funds Are Most Short S&P 500 In Four Years

• In a report issued Monday, Bank of America Merrill Lynch analysts Jue Xiong and Stephen Suttmeier look into the hedge fund world: strategies, positioning, moves, performance, etc.
• They assure that large speculators are most short the S&P 500 since November of 2011.
• Let’s dig into some of the most interesting conclusions drawn by the experts.

Hedge Fund Positioning By Major Strategies

BAML’s models show that:

• Market Neutral funds boosted their market exposure from flat to 1 percent net long.
• Equity Long/Short funds trimmed their market exposure 33 percent net long, below the 35 to 40 percent benchmark.
• “Disinflation expectation have been near 4-year high for Market  Neutral strategy since late August.”
• Macro hedge funds diminished their short positioning in the S&P 500, NASDAQ 100 and Commodities
• Macro hedge funds also reduced their net long in the U.S. Dollar. “They sold 10-year treasury to a net short for the first time in three months,” the report adds. “Meanwhile, they increased their shorts in EAFE and slightly reduced their long in EM.”
• Macro hedge funds turned to small cap preference for the first time in almost three months.

Hedge Fund Moves Across Asset Classes

The experts highlight a few significant hedge fund moves across asset classes – according to CFTC data.

• Equities. Large specs boosted their short positioning in the S&P500, but trimmed their shorts in the NASDAQ 100 and Russell 2000. In fact, large specs net short notional in S&P 500 reached $17.4 billion -the highest figure since November of 2011.

• Agriculture. Large specs reduced their net long stakes in Soybeans, augmented their long exposure to Corn, and maintained their Wheat shorts.
• Metals. Large specs cut their net long in Gold, Platinum and silver, and their shorts in Copper. However, they maintained their Palladium net long.
• Energy. Large specs added to their long positioning in Crude Oil, while reducing it in Gasoline. On the short side, they trimmed their exposure to Natural Gas, and Augmented their shorts in Heating Oil.
• FX. Large specs intensified their net short positioning in the Euro and Japanese Yen, while shrinking their shorts in the Australian Dollar, the Pound and the Mexican Peso last week.
• Interest Rates. Large specs’ net short in 30-year and 10- year Treasuries increased, while their long positioning in 2- year Treasuries continued to decline.

Disclosure: Javier Hasse holds no stakes in any of the securities mentioned above.