What Hedge Funds Are Buying & Selling: Trend Monitor Report ~ market folly

Tuesday, October 13, 2009

What Hedge Funds Are Buying & Selling: Trend Monitor Report

Embedded below is an interesting report from Bank of America Merrill Lynch regarding hedge fund position adjustments and performance for the prior month. The report touches on the fact that many funds have been buying S&P and NDX futures and have covered shorts in the Russell 2000. They also note that many funds are in the now crowded gold trade while some also bought platinum. Other moves in precious metals include selling silver and adding to shorts in copper. On the energy front, hedge funds were selling crude oil and reducing longs in heating oil. In the forex markets, hedge funds have been steadily pressing their short on the US Dollar and the market seems to have held on to a crowded long Japanese Yen position.

The report also delves into interest rate trades which was of particular interest to us given the large amount of funds we've tracked that have positions on in this regard. The report notes that there are very deep short positions in the 10 Year Treasuries & 30 Year Treasuries but they were starting to modestly cover. They also apparently reduced some of their long 2 Year Treasury positions. These latest moves seem to indicate that hedge funds as a whole are scaling back a bit from the curve steepener trade. You'll remember that we've noted hedge fund legend Julian Robertson has put on a curve cap play which bets on rising interest rates on the long-term bonds. On the other side of this argument, we've also seen bond connoisseur Bill Gross of PIMCO wager on deflation by buying long-term treasuries recently. This debate will surely wage on throughout the end of this year and well into next year, so we'll continue to track what side of the trade prominent hedge funds are taking.

Overall, a very intriguing report as it examines the hedge fund landscape as a collective whole as it pertains to portfolio adjustments. Here is the hedge fund trend monitor report from Bank of America Merrill Lynch embedded below:

Alternatively, you can download the .PDF here.

For more on current hedge fund strategies, we've covered a wide variety of reports from Goldman Sachs that we highly recommend checking out. They recently issued their 'Best Long & Short Strategies' in the current markets where they examine some of the trades hedge fund might be putting on. Additionally, they also have a hedge fund trend monitor of their own, similar to the one above. Lastly, they've also released a report on 'Where To Invest Now'. All are great additional reading on the topic of current hedge fund strategies. We'll continue our hedge fund portfolio tracking as always and will keep you updated as to what the smart money is up to.

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