First up, Market Folly:
It's been a while since we last checked in on the latest hedge fund exposure levels so today we present Bank of America Merrill Lynch's Hedge Fund Monitor. To start the new year, they estimate that long/short equity hedge funds have further reduced exposure to now just 25% net long. Historically, average equity exposure has been 35-40% net long equities.And from Bloomberg:
The last time we saw hedge funds reduce risk assets in late October, the market fell around 3.6% about a week later. Maybe it was a bit of luck with market timing, but it seems as though hedge funds in general have been ahead of the curve with their recent maneuvers.
After the market's furious rally over the past few months, it's clear that some managers think the equity market is overbought in the short-term and expect a pullback. However, many strategists like Jeff Saut believe dips should be bought.
Looking through current hedge fund trades across asset classes, there are a few notable plays that stick out. First, hedgies continue to hold crowded long positions in soybeans and corn. Crude oil and Copper are also crowded net long plays in the commodities spectrum....MORE
Hedge Funds Almost Double Bullish Gas Bets on Cold Snap: Energy Markets
Hedge funds almost doubled bets on gains in natural gas as futures climbed to the highest level since August on forecasts for colder-than-normal weather.
The funds and other large speculators raised their net-long positions, or wagers on rising prices, in four gas contracts by 94 percent in the seven days ended Jan. 4, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest increase in records dating to January 2010.
Natural gas climbed for seven straight days through Jan. 4, the longest advance since March 2008, as weather forecasters predicted a cold snap across the U.S. About 52 percent of the nation’s households use natural gas for heating, according to the Energy Department in Washington.
“Will the cold persist through the balance of the season? If it does, the floor has risen for natural gas,” said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston....MORE
