bank of america merrill lynch

Bank of America Merrill Lynch’s Hedge Fund Monitor details an analysis of the investable hedge funds’ strategy in play so far this year. Bank of America Corp (NYSE:BAC)’s Investable Hedge funds index is up 0.19 percent till Aug 22, and down 2.48 percent in its performance in S&P 500 (INDEXSP:.INX). The hedge funds performed the best in long/short investment in Equities (up 0.8 percent) and Events (up 0.68 percent) . Commodity trading was the worst performer for the year and was down 1.17 percent.

By market strategies, Equity Long/Short sold exposure to about 24 percent which is below the 35-40 percent historical threshold. In case of Equity Market Neutral Funds sold exposure to 0.4 percent. The Macro strategy across hedge funds bought short positions in S&P 500 (INDEXSP:.INX) and NASDAQ Composite (INDEXNASDAQ:.IXIC), bought USD, increased exposure in emerging markets, shorted commodities and bought in the 10 year treasury. Macros are focusing more towards large cap companies. Following is a more detailed summary of how hedge funds played across asset classes.

Large spec hedge funds added short exposure in S&P 500 but bought into NASDAQ 100 and Russell 2000, so that NASDAQ 100 readings are in the crowded long.

HF NASDAQ 100 Source BofA Merrill Lynch

Agriculture

Soybean, corn and wheat were the favorite buys for large caps during the month. Readings for all of these commodities are focused in the net long and are the highest since 2004 in case of wheat.

Metals

Gold, Silver, Copper, Platinum and Palladium were bought by large specs. The readings  on Silver and Platinum are neutral and strong rally is expected in Platinum prices. Copper is in the danger zone and is at its lowest levels since 2009, large specs covered their short positions in copper. Gold and Palladium have now exited the buy rating according to the large spec position.

Large Spec Gold positions Source BofA Merrill Lynch

Energy

Large specs bought crude & heating oil for this month, held onto gasoline positions and covered losses on shorts in natural gas. The readings for crude oil are in the net long while gasoline and heating oil are neutral. While crude oil price is volatile and keeps on changing.

Forex

As USD is looking up and Euro remains distinctly down, large specs covered their shorts in Euro and sold off USD and Yen. Readings for Euro are in the crowded short, USD is in crowded long while Yen is neutral.

Large Spec USD exposure Source BofA Merrill Lynch

Fixed Income Futures

Large specs where able to sell 30 year treasury only marginally, readings are on the boundary of long. Huge buys were made in 10 year treasuries, from $3.2bn notional to $9.8bn notional, readings are in the crowded long. 2 year treasury notes were also bought, readings are neutral.

Large Spec 10 Year Treasury notes  Source BofA Merrill Lynch