The monthly Hedge Fund Update from UBS for October 2013 shows that world markets put in another bumper performance on relief that the US had emerged from its shutdown and debt ceiling travails. The MSCI World Index gained 3.9% in October and 21.9% YTD.

Europe was the stellar performer, scoring a return of +5.7% for the month.

UBS tracks the market movers

The UBS report contains interesting insights into the activities of its prime broking clientele – a look-see into what the market’s crème-de-la-crème, the institutional trader, is doing.

UBS reports that prime brokerage balances for long positions in European equities were up a solid 63% compared to the levels in August 2012. Because short position balances also grew, but at a slower rate, the continent’s net long PB balances, as a proportion of the EMEA region, rose from 56% in August 2012 to 97% last month.


This is a reflection of UBS’ institutional clientele’s highly bullish stance on Europe.

Institutions trimming US positions?

On US positions, UBS reports that long exposure was up from 151% to 154% while short exposure went up from 119% to 120%.

“Although exposure levels finished the month higher, these increases suggest active trimming of positions as markets rallied (S&P 500 +4.5%),” says the report.

The long, short and gross US Equity exposures of PB touched post-crisis highs during the month.


EMEA region also sees drop in exposure

PB clients reduced longs in EMEA to 158% from 168% and shorts from 103% to 101%. On a net basis PB exposure came off from 65% to 57%, but is still high compared to the 29% seen in July. These show that PB clients lightened exposures in the face of a rising market.


PB managers increase exposure in APAC

UBS’ institutional clients upped their long positions in APAC region from 131% to 134% while short exposure remained flat at 76% – therefore PB net exposure was higher at 58% from 56% – as the MSCI AC Asia finished +2.7%.