In the new year hedge funds have been doing well for themselves, but have so far lagged the S&P500. Investable HF index gained 1.46 percent month to date (till January 17th), while S&P 500 was up 3.84 percent in the same period. Just like last year, hedge funds continue to excel in the Event Driven and Equity Long/Short Strategy that returned 2.2 and 1.82 percent respectively.
Based on different strategies, hedge funds continue to maintain divergent exposure from the benchmark levels. Market Neutral Funds are approximately 2 percent net short, which exceeds the 50 percent L/S exposure level. Similarly Equity Long/Short are 27 percent net long, in contrast to the 35-40 percent average. Global Macro funds are stacking up on commodities and 10-yr treasuries. It is worth noting that Commodity Trading Advisors was the worst performing strategy of last year. Macro funds are adding to their long positions in EMs, while increasing shorts in EAFE. Macros also increased short exposure in USD futures.
Top value fund managers are ready for the small cap bear market to be done
During the bull market, small caps haven't been performing well, but some believe that could be about to change. Breach Inlet Founder and Portfolio Manager Chris Colvin and Gradient Investments President Michael Binger both expect small caps to take off. Q1 2020 hedge fund letters, conferences and more However, not everyone is convinced. BTIG strategist Read More
The last update of hedge funds’ movement through asset classes noted the exit of the yen from the crowded net short zone. Large specs continued to cover their shorts in the yen and at the same time have reached modest long exposure in the euro. HFs continue to buy Russell 2000, where readings are breaking records and have never been this high since 2003.
Meanwhile large specs have multiplied long exposure in Gold in the last two weeks. It looked like Wheat would pile into the crowded net short zone, however, hedge funds partially covered their shorts in last week, reversing the trend for now. Same goes for heating oil, where aggressive buying indicated entry into the crowded long zone, however, large specs sold heating oil to $3.6 billion notional in the week ending on Jan 17. A summary of how hedge funds were positioned across multiple asset classes as of 17th January is as follows:
Buy: Russell 2000, Corn, Gold, Silver, Platinum, Palladium, Crude oil, Euro
Net Long: Heating Oil, Gasoline, Euro
Crowded Net Long: S&P 500 (S&P Indices:.INX), Crude oil
Sell: NASDAQ-100 (INDEXNASDAQ:NDX) , Soybean, Heating Oil, Gasoline, 10 yr notes, 2 yr notes
Net Short: Natural Gas, Yen, Wheat, 30 yr Notes
Flat: S&P 500 (S&P Indices:.INX), Copper, USD