Goldman Sachs’ latest analysis of hedge fund quarterly holdings has some interesting insights, one of them being that hedge funds hold large net short positions in EM equities, volatility, gold, and high-yield bond ETFs. The large short exposure in VIX index was also pointed out by Societe Generale in a weekly update.
GS’ hedge fund trend monitor points out that these ETFs serve as a hedging system for hedge funds rather than a investment vehicle. The gross allocation of ETFs in hedge fund holdings is down from 6% in 2009 to 3% in 2Q2013 and it makes up for $132 billion in gross exposure which compares with the $1.5 trillion exposure in single stocks.
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Hedge funds seem particularly bearish on volatility
The bulk of the $132 billion has been put in short positions, and hedge funds hold $102 billion or 79% of the total exposure in short ETF positions. The difference especially stands out as only 30% of hedge fund single stock holdings are in the form of short positions. Hedge funds seem particularly bearish on volatility, Chinese large cap companies and high yield bonds.
Hedge fund gross short positions in SPDR Gold Trust (ETF) (NYSEARCA:GLD) surpassed long positions until the end of Q2. Hedge fund long holdings in gold ETF amounted to $2.14 billion whereas short positions were upto $2.99 billion. SPDR Gold Trust (ETF) (NYSEARCA:GLD) is also held by the highest number of hedge funds after SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Short positions in iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI) futures amounted to $1.35 billion whereas only $153 million were held in longs by hedge funds. While hedge funds still don’t have a net short in Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO), but this ETF saw the highest spike in short interest since Q1.