The S&P 500 continues to look attractive to institutional investors despite the long-running rally, while hedge funds picked up billions of dollars in 10-year Treasuries in a week. In fact, some net-positions are at or close to three-year highs, particularly with asset manager positioning in MSCI EM, EAFE and EUR/USD, report analysts at Bank of America Merrill Lynch.

Hedge funds buy Treasuries

In a report dated August 26, Jue Xiong and team released flows and futures positioning for the week of August 16 through August 23. They reported that hedge funds purchased $1.2 billion in EM futures, $2.2 billion in EUR/ USD and $700 million in JPY/ USD. Additionally, this investor class picked $9.9 billion worth of 10-year Treasuries and $2.4 billion in two-year Treasuries.

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The BAML team estimate that Macro hedge funds went even longer in EMs, the S&P 500 and NASDAQ 100, all of which were assets they had already been long in.

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Macro hedge funds also doubled-their 10-year Treasury short positions, bought the Commodity sector and slashed their USD long.

Asset managers up exposure to S&P 500

Further, they said asset managers continued their “big rotation” during the week as well, buying $3.8 billion worth of S&P 500 and selling $6 billion worth of two-year Treasuries. They unloaded $500 million worth of 30-year Treasuries as well but bought $500 million worth of EUR/ USD and $200 million in EM.

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Leveraged funds picked up $1.2 billion in EM futures, $9.9 billion in 10-year Treasuries and $2.4 billion in two-year Treasuries. Additionally, they purchased $2.2 billion worth of EUR/ USD and $700 million in JPY/ USD.

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Meanwhile Managed Money funds purchased $4.4 billion in WTI crude and $1.2 billion gold but unloaded $900 million worth of silver and $300 million in copper.

Net positioning around three-year extremes

The BAML team also found that asset managers were close to their all-time highs in MSCI EM, EAFE and EUR/ USD, while Leveraged funds were close to their all-time high in EM and near their three-year high in JPY/ USD. They were also close to their three-year low in GBP/ USD.

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Further, Managed Money was still close to its three-year high in gold.