The latest Hedge Fund Watch from SocGen analysts Alan Bokobza, Roland Kaloyan, Arthur van Slooten, Praveen Singh, Gaelle Blanchard and Ahmed Behdenna looks at hedge fund positions across different asset classes to “obtain valuable insights on financial market trends.”

The old chestnut, long Nikkei-short yen, is back in play

Hedge funds remain heavily short on the Yen, sensing that the currency could devalue further given the current monetary taper in the US and the unrelenting QE in Japan. On the other hand, a recent spike in net long positions in the Nikkei shows that hedge funds expect Japanese equities to appreciate further.

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Hedge funds are lukewarm on equities

According to the research note, hedge funds have turned down their long stance on US equities after the new Fed chief, Janet Yellen, said taper would keep its course despite the turmoil in emerging markets and the extreme weather in the country. This is particularly apparent in the funds’ net positions on the S&P 500 and in the Russell 2000.

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Hedge funds bullish on crude and natural gas

Funds seem to have anticipated the spurt in energy due to the abnormally cold weather in the US, and boosted net longs in crude oil and natural gas. SocGen, however, warns that a seasonal correction could be round the corner.

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Hedge funds and bonds

Hedge funds are net short on 10-Year US Treasury Notes but highly bullish on 30-Year US Treasury Bonds, apparently betting on a fall in interest rates.

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Hedge funds selling copper

According to SocGen, funds have turned bearish on the prospects of copper, an industrial base metal, because of the Chinese slowdown. We note in the following chart that after a brief flirtation in the net long territory, hedge fund positions in February turned right back into the short zone.

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Gold back hedge funds’ radar

After long exposure reached a low in July 2013 and then again in December, hedge funds are now going long on gold – we note that net long positions have increased between December and January.

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Hedge fund flows

Apart from hedge fund positioning across asset classes, the report also contains a section on flows and assets trends for the industry.

The interesting chart below reveals that global hedge fund AUM, currently at $2000B has scaled the previous high seen in 2008-2009.

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Here is a chart on hedge fund performance by strategy. Rather obviously, equities have paid off handsomely, while CTA / Managed Futures have underperformed.

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