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Alternative Market Briefing

Hedge funds up in the first half, still lag S&P

Wednesday, July 11, 2012

Bailey McCann, Opalesque New York: Hedge funds were up 1.26% in the first half of this year but still trail th S&P 500 according to a new report from Bank of America Merrill Lynch Global Research. The global diversified hedge fund composite index was up 1.26% for the first half of 2012, underperforming the S&P 500’s 8.31%. Convertible Arbitrage was the best performing strategy up 4.14%, while Short Bias was the worst down 7.11%.

Market Neutral funds bought market exposure to 3% net long from 1% net short, reversing the aggressive selling in June. Equity Long/Short maintained market exposure at 23% net long, well below the 35-40% benchmark level. Leverage, as measured by NYSE Margin Debt, declined further by 11.5% year-on-year (YOY) to $279.2bn in May. This marks the 7th consecutive month of negative YOY growth since the momentum indicator fell below zero last November.

In June, funds continued to short S&P 500 futures while buying NASDAQ 100 futures. Commodities buying is also on the rise, with funds buying soybean, corn, and wheat. They also bought gold and silver while covering shorts in copper. In currencies, funds are holding steady on the Yen, covering Euro shorts and selling out of the US Dollar.

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