Thursday, October 7, 2010

Hedge Fund Industry Sentiment - Oct 7, 2010

I thought I would share this interesting article with our readers.

Even though the sample size (109 HF managers) is relatively small, I still think there is something to be said about the current HF industry sentiment.

Bull/Bear Ratios:

SPX: 0.83

10 yr Treasures: 0.89

Dollar Index: 0.58


19% plan increasing leverage into NOV. (cited due to cheap borrowing rates)

Why record company cash balances?:

79% cite uncertain economic, political/regulatory outlooks vs 14% lack of investment opportunity. (I find that with current interest rate levels that the later is unlikely, unless you are a domestic company).

What are they doing with their cash positions?:

28% paying down debt vs 17% want to keep it on their balance sheet.

Take away:

HF managers are pretty neutral across the industry assuming this sample is normally distributed, except with more slight bearishness on the dollar. Views tend to say there is more risk aversion in the US economy. The views are conflicting in light of the SPX's 8% performance. US equities definitely may tip the sentiment to more bullish, however as November approaches for sure risk aversion may remain strong and keep sentiment mixed.

In light of this, those funds that plan on levering up into the next month should probably hedge instead. If I were to take a stab in the dark, it is probably those really large funds sitting on large cash positions who missed/took a hit on the September equity rally that wish to do so.


Citations: from the article link above From Hedge Week

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