Hedge funds are holding record net long exposure, compared to last couple of years, both in US equities and Japanese markets, Societe Generale’s Hedge Fund Watch reports. These findings tie into the findings reported by BAML’s hedge fund monitor. The hedge funds have piled up their long bets against the backdrop of 1.3 trillion Yen bond buying program that was revved up by the Bank of Japan on April 4th.
The enthusiasm for US equities extends to both small cap and large cap stocks. Hedge funds continue to net sellers of VOLATILITY S&P500 (INDEXCBOE:VIX) which implies that hedge funds do not fear volatility on S&P 500 index. While there may be a general consensus that US equity markets will outperform in this year, the same cannot be said for Japanese stocks.
Kyle Bass and George Soros are among those who see Japan’s monetary policy as unsustainable and overly aggressive. Both Soros and Bass said in recent interviews that the way BoJ is doing it, there may come a point when Yen weakening becomes uncontrollable and Japanese themselves lose faith in the currency thus causing the market to fall. Both investors, like so many others, have short positions in the Japanese Yen.
Among bonds, hedge funds have particularly positive outlook on 10-yr and 30-yr treasury notes. While in currencies, the money managers are selling currencies across the board against the US dollar, the one in particular that has picked up in the past weeks is aggressive selling of Euro against buying in the dollar.
Across commodities, hedge funds have the highest short exposure in copper which is also evident from the new shorts in copper mining companies that pop up everyday. Natural gas and wheat are also in the short zone. The highest long exposure fpr funds is in Platinum.