HFs reduce some exposure to equities; still very long gold, oil  
Hedge funds suffered their worst five-day return since October last week, falling
0.62% on the week ending December 9. The losses were largely concentrated
among Macro, Equity Long/Short and CTA funds. Macro HFs had their worst
week since early June, dropping 2.36% as their long commodities/short USD
trade moved against them. Weakness in the Emerging markets where Macros
have a deep crowded long position also added to their losses. Overall HFs began
to pare their equity positions last week, while maintaining the steepening yield
curve trade (crowded long 2-Yr Ts/ short 30-Yr Ts) and exposure to commodities.
Examining HF positioning by major strategies, we find Equity L/S equity exposure
fell to net long ~40% last week (back to the 35-40% historical range); net
exposure had risen to ~50% in late November. Meanwhile Market Neutral funds’
market exposure continued to decline but levels remain neutral. Macro HFs pulled
back from their near crowded long in the S&P 500 but added to their crowded
longs the Emerging markets. For more factor exposure tilts see pp 2-6.