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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chomu's picture

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

Headbanger's picture

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

Bill of Rights's picture
Family served arrest warrants for 'disturbing the peace' at graduation



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

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.

This is it's picture

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


NoDebt's picture

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

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

OpenThePodBayDoorHAL's picture

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

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.

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?

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."

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.

Luckhasit's picture

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

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


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


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




Raul44's picture

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

IntercoursetheEU's picture

"I'm never going long again"

-Bruce Jenner's penis

Counterpunch's picture
Counterpunch (not verified) Jun 4, 2015 9:44 AM

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.