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Hedge Fund Position Update

Tyler Durden's picture


In her weekly HF positional analysis, BofA' Mary Ann Bartels (whose recent technical prediitions did not quite pan out) finds that Long Short hedge fund exposure has declined from 25% to 18% as of January 10, well below the 40% average, market neutrals are -3% net short (explaining the ongoing bloodbath in the space), and that macro HFs are long commodities and short US equities and 10 year Treasuries. All in all, exposure continues to be below average bullish levels, yet the market continues to go up. Cue in TrimTabs and let them answer just how is doing the buying.

On Long-Short exposures:

Estimated factor exposures for Long-Short Equity Funds

  • Long/Short funds market exposure is ~18% net long, which is likely due to unwinding exposures at year-end. It may take our models several weeks to put up a rotation back to the market.
  • Positive inflationary expectations; large cap, high quality and growth tilt.

Significant factor exposure changes since last week

  • Long/Short funds switched to high quality tilt from quality neutral.
  • Other readings didn’t change much.

Market Neutrals are even more bearish:

Significant estimated factor exposures for Equity Market Neutral funds

  • M/N hedge funds market exposure is ~3% net short (below 50 L/50 S).
  • Positive inflationary expectations; slight value tilt; size and quality neutral.

Significant factor exposure changes since last reading

M/N hedge funds readings didn’t change much from last reading.

On the other hand, L/S decided to materially cover their Nasdaq 100 short positions:

L/S HFs noticeably covered NASDAQ 100 shorts

Our models indicate that Equity Long/Short (L/S) hedge funds were only slightly short the NASDAQ 100 futures at year-end. They moved to a high quality tilt from neutral while favoring large caps and growth style stocks.

Macro funds were not fans of equities, instead they more than made their money being long gold:

Macros Exposure Analysis

Preliminary readings indicate that global Macro hedge funds went up 3.3% in December and up 8.0% in 2010. In comparison, HFRX investable Macro hedge funds were up 1.4% in December and down 1.7% for the year respectively. Based on our exposure analysis, macros were long commodities and short the US dollar, US equities and 10-yr Treasuries at the end of 2010. They still favor small caps.

Lastly, and as was discussed on Zero Hedge recently, the bulk of the gains in the market in November came on the back of increasing margin, resulting in a leveraged pursuit of beta, a strategy which works until it always blows up spectacularly.

HF leverage, as measured by NYSE Margin Debt, rose to $274 billion in November which is up 1.6% since month-over-month and up 24.0% year-on-year. Leverage does remain below the July 2007 peak of $381billion.

Generally speaking, NYSE margin debt has a positive correlation with the equity market, because investors add leverage as the market goes up and leverage is reduced as the market falls. Although the S&P 500 went down marginally (-0.23%) in November, margin debt rose 1.6% and continued the up-trend since September. In comparison, a very sharp correction for the US equity market from May to June of 13% decreased confidence in the US equity market and margin debt fell 9.8% in May. Margin debt levels were up 2.1% in July and unchanged for August.




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Mon, 01/10/2011 - 16:27 | Link to Comment Prof Gulliver
Prof Gulliver's picture

Charts, schmarts. Look at today. Just buy the fucking dips.

Mon, 01/10/2011 - 16:30 | Link to Comment HarryWanger
HarryWanger's picture

Exactly! As I said this morning, this would be just like Friday, but the dip. Anytime this thing pulls back even -5 SPX, the buyers step in. Getting too easy. Also, keep adding AAPL. Tomorrow might be a great day after a sell on the news event with VZ. Step in and buy maybe a few bucks lower for the run into earnings.

Mon, 01/10/2011 - 17:25 | Link to Comment hbjork1
hbjork1's picture


I have put AAPL on my no buy list  after using my stepdaughter's (lawyer)Applelaptop over the holidays.  I had trouble maintaining multiple internet screens open and highlighted.  Safari was balky.

She apparently agrees since she bought herself a new HP/Microsoft laptop for Xmas.

Straw in the wind.

Mon, 01/10/2011 - 21:28 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

Precious metals are charging up for another run, this time to what, $37 silver, and 1470 gold??

Price fluctuation only really matters if you are thinking about selling, if you are planning on holding on for 3-5 years atleast it really doesn't matter what day-to-day PM prices are.  The big boys will do whatever they can to try to scare you out of your position (they know there are MANY weak hands), so be prepared.

Check out our latest PsychoNews story: Signs of the Apocalypse

What is [also]  interesting is that China has recently announced they have been working on the J20,a prototype of a stealth fighter.  While publicly America's most advanced aircraft is the F22, it seems unlikely that it is the most advanced weapons system actually available.  The American Military-Industrial Complex could well be sending a message to China, "You may have a stealth fighter in development, but we have weapons the world has never even heard about".  Weapons that could drop planes out of the sky, kill livestock, alter weather, and can even be used for mind control!  If the reader is unfamiliar with HAARP, perhaps now would be the time to do some research. 

Mon, 01/10/2011 - 21:28 | Link to Comment Herd Redirectio...
Herd Redirection Committee's picture

server f***ed up

Mon, 01/10/2011 - 21:52 | Link to Comment PrDtR
PrDtR's picture

Good comment hbjork1, much appreciated..

Mon, 01/10/2011 - 16:40 | Link to Comment Ferg .
Ferg .'s picture

I'm just amazed that " buy the dip " has now become an intraday strategy . It took the near outbreak of war on the Korean peninsula/another Eurozone sovereign throwing in the towel to even put a dent in this market .

Glad I bailed on my ES S&P short earlier today . The relentless march upwards continues .

Mon, 01/10/2011 - 16:38 | Link to Comment Horatio Beanblower
Horatio Beanblower's picture

Is this was a bona fide police state looks like?


British National Party candidate evicted from election hustings in the UK following complaint from the Labour (socialist) candidate -

Mon, 01/10/2011 - 16:42 | Link to Comment Ragnarok
Ragnarok's picture

I view the Nanny State in the UK more as a Theocracy. 

Mon, 01/10/2011 - 16:56 | Link to Comment Horatio Beanblower
Horatio Beanblower's picture

I cannot disagree with you.  Before parliament begins business each day, prayers are said.  Also, church leaders are given automatic seats in the House of Lords (Senate) -  What a joke.

Mon, 01/10/2011 - 16:40 | Link to Comment RobotTrader
RobotTrader's picture

Every day its the same thing.

Slam the tape in the morning based on PIIGS problems, then slowly grind the tape up to blow out more bears.

Mon, 01/10/2011 - 16:43 | Link to Comment scatterbrains
scatterbrains's picture

this just reflects the fact that all who were going to sell have sold. Only traders trying to position short and having to scramble to cover by the close on the relentless fed manipulation are left.

Mon, 01/10/2011 - 16:45 | Link to Comment ReallySparky
ReallySparky's picture

Speaking of Hedge Fund Managers...Every night I pray that we are just one "Mad HedgeFund Manager" away from a COMEX explosion.  Surely there is one out there with deep enough pockets to take on Blythe and make a name for him/herself in the process. I am hoping for one crazy enough to think that he/she could be the next Soros, "the one who broke the COMEX."

Mon, 01/10/2011 - 16:48 | Link to Comment Cdad
Cdad's picture

Attention hedge fund managers:  This is a "Helmet On" day.

Thank you.

Mon, 01/10/2011 - 16:50 | Link to Comment lsbumblebee
lsbumblebee's picture

I wont make a move until I see Alcoa's better than expected earnings report. I'm sorry but that's just the way I feel about the whole darn thing.

Mon, 01/10/2011 - 17:03 | Link to Comment spartan117
spartan117's picture

AIG getting monkey hammered and down 6%.  X down 10% in the last few days.  Where the fcuk is Spalding_Smailes??? 

Mon, 01/10/2011 - 17:19 | Link to Comment Sylvia Plath
Sylvia Plath's picture

At this point, I'm selling high, waiting for dip to buy back lower.  This never seems to be an accepted strategy, but I end up making some good coin between closes and next day opens doing this... just don't short Silver or really anything on the COMEX~

Mon, 01/10/2011 - 17:49 | Link to Comment dehdhed
dehdhed's picture

first graph seems to inversely correlate to a past article pertaining to margin debt and investor net worth.   i'm sure there's a connection somewhere but i'm not sure what it is yet.

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