After 7 years of consistently failing to generate alpha [5], hedge funds as a group have become the vastly overpaid laughing stock of the asset management business (of course, there are still the occasional borderline criminal outliers [6]); in fact after we first predicted their demise about 3 years ago (because in a world in which central banks are also Chief Risk Officers, who needs "hedging"?) the pension funds have finally figured out the futility of parking cash with the 2 and 20 crowd, and first Calpers and soon most other managers of other people's money are now pulling out their cash in droves from the hedge community.
However, hedge funds are still useful for one thing: observing where the fast money herd is parked, and doing precisely the opposite in advance of the herd dispersing (see "Presenting The Best Trading Strategy Over The Past Year: Why Buying The Most Hated Names Continues To Generate "Alpha [7]""). Because in a market as illiquid as this one, any and all fast, sudden moves by even the smallest group of traders results in dramatic price movement outliers.
So for those curious how to do the opposite of what the "smart money" is doing, here is the full breakdown. Presenting a list of the biggest outliers from the mean weekly position in the most popular assets in the speculative universe: everything from the massively, near-record, overbought US Dollar, all the way to dramatically oversold Aussie Dollar, the easiest proxy for the Chinese slowdown.
[8]
This is how JPM, the source of the chart above, calculates the data set: "Net spec positions are the number of long contracts minus the number of short using CFTC futures only data. This net position is then converted to a USD amount by multiplying by the contract size and then the corresponding futures price. To proxy for speculative investors, commodity positions use the managed money category, while the other assets use the non-commercial category. We then scale the net positions by open interest."
And in case that isn't enough, and one wishes to add insult to injury and go long the most shorted sectors (and vice versa), here is the breakdown of the S&P500 sectors with the highest and lowest percentage of short interests as a % of shares outstanding.
[9]
