Societe Generale SA (EPA:GLE) has some interesting research out on hedge fund positions. Some of the composite movements may seem obvious in the macroeconomic climate but some of the moves that hedge fund have been making recently may surprise the regular investor.
The letter uses data from EUREKAHEDGE which collects its information from almost 25,000 alternative funds around the world. The report composites the movements of many different hedge fund to put a trend to the recent positions of those funds globally.
The first diagnoses given in the report is that hedge funds in general have drifted away from the Nasdaq. This has been a trend for a while as the equity market has failed to pick up from its first quarter rally.
Hedge funds are now holding less log positions in stock registered on the Nasdaq. Part of this is surely from the disintegrating returns from the equity market while Facebook's disastrous offering has hurt the index's reputation. The Nasdaq peaked in February and has seen positions fall since then.
In general, shorts on the S & P 500 are increasing. According to the report, net shorts have doubled since the 16th of May. It is speculated that this is due to a reduction in net positions that has been going on for some time and has left the stock vulnerable to headline shocks.
To no one's surprise net shorts on the Euro have increased. The report asserts that short on the currency have reached a record high. Selling pressure on the currency has reached unprecedented levels and hedge funds are seeking shelter in the US dollar to protect themselves from European shocks. Funds have begun piling into 30 year US Treasuries.
In the commodity market there have been some interesting changes. Hedge funds, as a whole, have dropped their long positions in oil as the energy source drifts towards lows not seen since last decade.
Copper holdings are decreasing as the outlook on China continues to degrade. China is the most important factor in decisions in many commodity markets and the nation is particularly important in deciding the price of metals.A sluggish China means collapse in the market for many base metals.
Overall the news from hedge funds has not been inspiring for the world economy in general though it should be inspiring for the individual investor. Though funds seem to predict that Europe and China will be weak in the future, there is much to be learned from their machinations.
Hedge funds are led by some of the best and brightest from around the world. Their movements on the global markets should be heeded as decisions made by those who spend their lives following the markets. This letter represents an aggregate of what those professionals are doing.