Hedge funds continue to outperform the S&P 500, as the diversified hedge fund composite index was down 0.46 percent in the week ending on Nov 14, while the S&P 500 (INDEXSP:.INX) was down 2.8 percent over the same period. As concluded by other outlets as well, commodity trading advisers have not been performing well this year. BAML’s hedge fund monitor reports that CTA was down -3.02 percent quarter to date. The only strategy with a positive index was Convertible Arbitrage, and that too, only marginally by +0.08 percent QTD. The combined Diversified Hedge Fund Index has detracted by 0.98 percent for the Q4 so far.

BAML hedge funds net market exposure
Via Bank of America/Merrill Lynch

Long/ Short equity based hedge funds bought into NASDAQ 100 in the last week of November. The preference is towards value rather than a neutral approach and the tilt is increasingly towards large cap companies. The exposure for L/S equity funds was maintained at 24 percent net long.

On the other hand, the Macro strategy hedge funds continued to move away from large caps. Macros have also bought into NASDAQ 100, but sold S&P 500. The shorts in USD were maintained, while shorts in EAFE were increased and those in EM were covered.

Across asset classes, hedge funds bought S&P 500 (INDEXSP:.INX), wheat, gold, crude oil, USD, and 30,10, and 2 yr treasury notes. BAML now considers the treasury trade to be crowded, based on their research. Selling was observed in NASDAQ 100, soybean, corn, heating oil, and gasoline. Shorts in Russell 2000, copper, natural gas, and Euro were added to, while Yen was covered. Soybean has exited the crowded long position, which is a first since June. No significant buying or selling was observed in platinum, palladium, and silver.

treasuries hedge funds crowded trade