BAML is out with their weekly hedge fund monitor. Only a few days ago, BAML came out with their quarterly hedge fund monitor and noted that AIG remains the top hedge fund stock. In this week’s weekly monitor, Stephen Suttmeier, CFA, CMT of BAML notes that market neutral hedge funds have been cutting their equity exposure and are now 9% net short.

market neutral hedge funds exposure

Significant estimated factor exposures for Equity Market Neutral hedge funds

Market neutral hedge funds exposure was reduced to 9% net short from 6% net short. Market neutral hedge funds turned neutral on inflationary expectations & size preferences; switched to low quality from neutral; and leaned further towards growth style.

Equity Long/Short aggressively cut market exposure to 21% net long from 32%, well below the 35-40% benchmark level. Macros reduced their long positions in the S&P 500 & NASDAQ 100, but leaned further toward large caps. They increased their long exposure to commodities, EAFE, and EM (EM is at its highest exposure since Oct’11) and aggressively added to their long Treasury and US $ Index positions.

Global Diversified Hedge Fund Index up 0.38% in May

The Global Diversified Hedge Fund Index was up 0.38% in May, underperforming the S&P 500 index by 170bps. Preliminary readings show that Event Driven & Equity Long/Short performed the best, up 2.06% and 1.08%, respectively. Managed Futures performed the worst and was down 2.96%.

Hedge Funds Buy US Stocks, All Others Sell: BAML

Significant HF moves across asset classes based on CFTC data

Equities. Large specs sold the S&P 500, NASDAQ 100 and Russell 2000. NASDAQ 100 and S&P 500 remain in a crowded long.

Agriculture. Large specs bought soybean, sold corn, and reduced their shorts in wheat. Positioning is neutral.

Metals. Large specs bought gold, silver, platinum and palladium, and partially covered copper. Gold and Silver remain in the buy zone.

Energy. Large specs sold crude oil & gasoline, added to their shorts in heating oil, but partially covered their natural gas short. WTI crude oil remains in a crowded long; heating oil remains a crowded short.

FX. Large specs reduced their net long positions in the US $ Index, while covering their shorts in Euro & Yen. Euro moved out of a crowded short; US Dollar moved into a crowded long

Interest Rates. Large specs bought 30-year & 10-yr to a net long, but doubled their shorts in 2-yr T-notes. Readings are neutral.