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Alternative Market Briefing

Hedge funds down 0.22% after rocky October, continue equities sell off - BAML

Tuesday, October 30, 2012

Bailey McCann, Opalesque New York: Early October data from Bank of America Merrill Lynch shows that hedge funds are down slightly for October and are continuing their heavy sell off of US equities. According to data in the report, COT Eurodollar positioning is an unexpected leading indicator for the equity market - leading the S&P 500 by one year with a correlation of 72% since the beginning of 2000 and 74% since 2007. The indicator peaked in late November last year – a risk that the S&P 500 could face the start of a correction near year-end of 2012.

The investable hedge fund composite index was down 0.45% month-to-date as of October 24, outperforming the S&P 500’s -2.22%. In terms of strategies, Long/Short was the best performer, up 0.28%; CTA Advisors performed the worst and was down 3.28%. Long/Short Equity is selling out of the NASDAQ 100 and relaxing its quality tilt focusing more strongly on value as funds hunt for returns. By way of contrast, Macros added to their risk assets buying S&P 500, NASDAQ 100, commodities and 10-year Treasuries, while adding to their shorts in the USD.

Commodities continue to see inflows with funds buying soybean, corn and wheat, although they are selling metals gold, silver and copper. Commodities buyers are also selling out of crude and heating oil, and main......................

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