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Hedge Funds Have Never Been Longer, Short Exposure 25% Less Than Before Last Market Peak

Tyler Durden's picture




 

If the central banks' intention was to convert "hedge" funds into what are essentially plain vanilla long-onlies (understandable in a world in which being long the most  shorted names generates outsized returns year after year), they have succeeded.

According to the latest Bank of America hedge fund holdings analysis based on 13F filings and estimated short positions of the equity holdings of 952 funds, the banks estimates "hedge funds raised net exposure to a record high of $785bn notional at the beginning of Q2 2015, up 6.1% QoQ and more than double the pre-crisis peak of $373bn (Q2 2007)."

In other words, hedge funds have never been more net long: percentage-wise, net exposure climbed slightly to 77%, also a record high and surpassed the pre-crisis peak of 59% (Q2 2007). Net exposure fell to 70% after subtracting ETF shorts, compared to 69% in the previous quarter. Cash holdings remained at the record low level of 3.3%.

Hedge funds have also rarely been less short: in Q1 short exposure was 55%, 25% lower than the Q2 2007 reading of 74%. Which means that once the dam breaks and the selling begins, the amount of short covering, that traditional emergency break in every panic selling scramble, will barely make a dent.

Some more observations:

Hedge funds increased gross exposure to $1.9tn notional as of the beginning of Q2 2015, a 5.1% QoQ increase.  Percentage-wise, long exposure stood at 132%, slightly below the Q2 2007 reading of 133%. Short exposure was 55%, much lower than the Q2 2007 reading of 74% (Chart 3). When including ETF positions, gross exposure increases to 201%, compared to 200% last quarter.

 

And some index-specific observations: Hedge funds owned 5.84% of the Russell 3000 float shares as of the beginning of Q2 2015, a new record high after a brief setback in Q4 2015. Hedge funds increased ownership of large caps and small caps to a record high as a percentage of float shares, at the cost of mid-caps. Portfolio weight of large caps rose to 79.5% from 78.2% QoQ, below the Q2 2013 peak of 80.5%.

 

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Thu, 06/04/2015 - 08:22 | 6162393 chomu
chomu's picture

Pay 2 and 20 for what again..? Pure beta? Fan-f*cking-tastic..

Thu, 06/04/2015 - 08:33 | 6162421 Headbanger
Headbanger's picture

Massive, epic, biblical Muppet slaughter begins in 3...2....1...

Thu, 06/04/2015 - 08:38 | 6162434 negative rates
negative rates's picture

Religion is a story that has no end, each second is longer than the one before until the last second takes forever.

Thu, 06/04/2015 - 08:25 | 6162398 Bill of Rights
Bill of Rights's picture
Family served arrest warrants for 'disturbing the peace' at graduation

http://www.cnn.com/2015/06/03/us/graduation-cheering-arrest-warrant/inde...

 

We are so in need of a major reset in government and society.

Thu, 06/04/2015 - 09:18 | 6162517 Mike Honcho
Mike Honcho's picture

Manspreading: male sitting with legs "too" far apart in public seating/transit.  Two ARRESTS in NYC already, judge said dont do it again, you may leave now maggots.

Thu, 06/04/2015 - 08:26 | 6162403 This is it
This is it's picture

Never mind this. It's 8.30 and it's time to

SMACK SMACK SMACKDOWN!!!

Thu, 06/04/2015 - 08:34 | 6162424 NoDebt
NoDebt's picture

"What's the price of gold?  $1200 plus or minus 50 bucks, same as always."

Thu, 06/04/2015 - 08:36 | 6162429 NoDebt
NoDebt's picture

If they are net long 77% that leaves only 23% left to slaughter.  

"I will not rest until there are no more sellers" -  Janet

Thu, 06/04/2015 - 14:36 | 6163776 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

self-licking ice cream cone, with hedgies and now CBs pumping free money into "stawks"

Thu, 06/04/2015 - 08:47 | 6162449 101 years and c...
101 years and counting's picture

lets see, 40% more margin debt this time and less shorts that will buy to cover.  ie:  the Fed has created the ideal crash set up.

Thu, 06/04/2015 - 08:53 | 6162460 BurningBetty
BurningBetty's picture

Maybe they know something we don't? Hyperinflation and endless QE-stimulus around the corner that will push those exchanges vertically to new highs?

Thu, 06/04/2015 - 09:00 | 6162470 Kilgore Trout
Kilgore Trout's picture

Maybe they should now be called shrub funds.

"Even those who arrange and design shrubberies are under considerable economic stress at this period in history."

Thu, 06/04/2015 - 09:07 | 6162491 Temerity Trader
Temerity Trader's picture

Ninety-five MILLION Americans are in the markets, whether young or old, they have committed much of their “wealth” to a Fed supported equities market. If it collapses, the whole country falls apart. The bankers and oligarchs aren’t stupid; they will “do whatever it takes”. Five years from now they will be doing stimulus and QE and the bears will be penniless, but still expecting a meltdown any day. Interest rates will never increase in any meaningful way; the bankers have said as much. They may sneak through a couple of 25bps hikes, but as soon as the markets tumble they will cut again. This is the “New Normal’ and it is forever. The only question remains, is infinite debt possible? That is, can they print to infinity? So far the answer has been yes, and the central bankers plan to continue regardless of the jawboning. Nine-five million Americans are counting on them. 

 Seems a committed bear with real deep pockets might go short the tech bubble.

Thu, 06/04/2015 - 09:14 | 6162503 Luckhasit
Luckhasit's picture

of course they are long, who in the hell wants to get their faces ripped of by the cbs?

Thu, 06/04/2015 - 10:01 | 6162542 all-priced-in
all-priced-in's picture

TV ad for Interactive Brokers - two guys fly fishing -  Although it looks like more of a Broke-back Mountain experience than a real fishing trip.  

 

First fisherman - I did great trading last week - Bla bla bla -

 

Other fisherman -

 

My Interactive Broker set up a portfolio for me and he

"PUT ME INTO A COUPLE HEDGE FUNDS"

I am doing GREAT! Then he hooks a GIANT fish - 

 

Doesn't this mean I should buy into a couple hedge funds?

 

/s/

 

Thu, 06/04/2015 - 09:39 | 6162587 Raul44
Raul44's picture

Well that should worry the bulls, everyone knows that today hedge funds are the dumbest money.

Thu, 06/04/2015 - 09:54 | 6162679 IntercoursetheEU
IntercoursetheEU's picture

"I'm never going long again"

-Bruce Jenner's penis

Thu, 06/04/2015 - 10:44 | 6162899 Counterpunch
Counterpunch's picture

Find a hedge fund with a lot of bonds.

 

Find out if they are using interest rate reset dates AS maturity dates for calculating WAM.

 

If so, short the fuck out of it.

 

The last go round if you plotted actual WAM against money lost (I think %, looked quick and cant find what Im thinking of) you're dick will get hard at how tight the correlation was.  around .9

 

No shit.  now, if you think they learned from that (or that these dart throwing monkeys give a fuck) go long, young man...

 

No charge, boys.

 

 

 

 

 

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