How Are Hedge Funds Positioned Now? Insights From Goldman Prime And UBS
In the aftermath of the great short-squeezed degrossing (and subsequent partial re-grossing which has seen only 20% of the legacy short re-established), there has been a notable pick up in interest in current hedge fund positioning. Conveniently, we have some answers to this question from two of the biggest prime brokers around: Goldman and UBS.
Starting with the former, Goldman Prime Services makes the following big picture observations:
Long/Short ratios are at record highs driven by elevated long leverage as well as recent reduction in single stock shorts.
Hedge funds shifted net exposure out of North America and into the rest of the world YTD (as measured by over/underweight vs MSCI World).
Long/Short ratio of Non-Consumer Cyclicals has risen to new highs, though the group’s net MV as % of total US sector allocation remains below its five-year average.
Positioning on US Consumer Staples, by far the most U/W sector vs. the S&P 500, is decidedly bearish with a long/short ratio of 0.82 (five-year low).
Factor exposures to Growth (still net long) and Value (still net short) have seen little changes in recent weeks despite active sector and industry movements.
Overall Positioning: Leverage Ratios and Single Names vs Macro Products
Net Positioning: Regions and Markets
And here is UBS’ take:
January was a negative month for Hedge Funds with the majority of losses sustained in the last week of the month when the VIX jumped to highs of 37. Well-publicized short squeezes in small-cap stocks driven by retail flows resulted in some HF de-grossing and short covering, particularly in the US. It was a month of high dispersion among Equity Long Short funds and the majority ended in negative territory in both the US and Europe. By contrast, Asia-based funds (particularly more directional names) had a strong month due to long exposure in Asia Tech.
Some more details by strategy:
- Multi-strategy funds protected capital well and those with larger exposure to non-equity strategies such as Credit outperformed.
- Macro funds ended in slightly negative with discretionary strategies continuing to outperform their systematic counterparts. Most CTA funds had a difficult month as trends in several sectors reversed, although long positions in commodities such as corn, soybean, and wheat outperformed.
- Event Driven funds were a bright spot in the month with M&A continuing the momentum from the second half of 2020.
- The Quant space saw a few negative outliers but overall seemed to manage the January volatility.
And the visual summary, where the biggest highlight is the hammering L/S funds sustained.
Wed, 02/10/2021 – 14:10