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Alternative Market Briefing

Hedge fund reduce exposure to S&P, underperform index in October

Tuesday, November 05, 2013

Bailey McCann, Opalesque New York:

Hedge funds reduced their exposure to the S&P500 over the past week according to the latest research from Bank of America Merrill Lynch Global Research. October flash returns show hedge funds underperforming the S&P500 index for the month, reverting to a trend that dominated most of the first half of the year. Retuns for October are +1.18% compared to a price return of up 4.86% for the S&P500 index for the same period.

In terms of strategies, Equity Long Short and Event Driven performed the best, up 1.91% and 1.47% respectively. Convertible Arbitrage performed the worst. Market Neutral funds decreased exposure to 7% from 10% net long. Equity Long/Short also reduced market exposure to 23% from 30% net long; below the 35-40% benchmark level. Macros decreased their long exposure to S&P500 and NASDAQ.

The CFTC has resumed releasing position data through October 22,2013 following the US government shutdown. In commodities, funds sharply increased their long positions in Soybeans and increased shorts in corn and wheat. Wheat remains in a crowded short. In metals, funds sold gold and bought silver. In energy, funds bought WTI crude oil, heating oil and gasoline, and reduced their natural gas short.

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