Over the last few weeks, we’ve  been updating you with the best and worst performance numbers for 2012 across hedge funds. In terms of assets, the year end review of BAML’s hedge fund monitor reports a strong liking for fixed income rates, especially 10-year treasury notes. Hedge funds gathered in to buy the futures, as yields appreciated which leaped the readings into the crowded long zone. However, if only Macro strategy hedge funds are taken separately, they are still shorting the 10 yr notes.

10 year notes crowded long

Another notable activity was hedge funds buying euro to 333 percent, readings jumped from net short to net long within a week. Euro is looking good with hedge funds positioned in the net long zone for the first time since August 2011.

Hedge funds net long Euro

Overall, the Investible Hedge Funds Composite Index gained 3.02 percent in last year, while the S&P500 returned 11.52 percent. The performance lags behind the benchmark index by a fairly large margin, but in between the year there were spells of outperformance as well. According to BAML, the best performing hedge fund strategy of 2012 was Convertible Arbitrage, with +7.1o percent return on average. Other top strategies were Event Driven, with +5.47 percent and Equity Long/Short, with +4.39 percent. The losing strategies were Equity Market Neutral, with -4.81 percent and Macro strategy, with -1.09 percent. Merger Arbitrage and CTA Advisors managed to finish on the positive end with a performance of 0.97 percent and 0.44 percent respectively.

At the year’s end, Equity Long/Short  hedge funds turned over their portfolios and aggressively reduced market exposure to 19 percent from 27 percent net long.  Macro funds sold commodities to a net short while selling S&P 500, NASDAQ 100 and USD.

A summary of how hedge fund were positioned across multiple asset classes is as follows with yen staying strong in crowded short zone.

Buy: S&P 500 (S&P Indices:.INX), Russell 2000, Copper, Palladium, Crude oil, Heating Oil, Gasoline,

Net Long: Heating Oil, Euro

Crowded Net Long: S&P 500, Palladium, Crude oil, 10 yr Notes

Sell: NASDAQ-100 (INDEXNASDAQ:NDX), Soybean, Corn, Wheat, 30 yr Notes

Net Short: Natural Gas, USD

Crowded Net Short: Yen

Approaching Short: Wheat

Flat: Gold, Silver