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Alternative Market Briefing

Macro hedge funds turn negative on commodities and emerging markets

Tuesday, August 27, 2013

Bailey McCann, Opalesque New York:

Macro hedge funds have aggressively reduced their commodities position to a net short for the first time since June according to the latest research from Bank of America Merrill Lynch. Macro funds have instead opted to increase their exposure to the S&P500 and NASDAQ. Data also shows that both long short & market neutral strategies have disinflationary expectations.

The investible Hedge Fund Composite Index was down 0.57% for the month, as of Aug 21, compared to a -3.6% return for the S&P 500 index. In terms of strategies, Convertible arbitrage performed the best, up 0.16% while Equity Long Short performed the worst, falling 0.93%. Market Neutral funds decreased market exposure to 9% net long from 15% net long. Equity Long/Short also reduced market exposure to 34% from 42% net long; slightly below the 35-40% benchmark level.

In commodities, funds sharply increased their long positions in Soybeans and marginally reduced their corn shorts. Wheat was effectively unchanged andremains in a crowded short. Funds also bought metals across the board. Silver and Gold were the largest, measured by notional values. Gold remains in the contrarian buy zone; funds are flat copper for the first time since March. In interest rates, funds flipped from net sho......................

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