It’s well known that 2012 has been a bad year for hedge fund managers.
Forbes reported back in August that barring a “miracle”, 2012 was going to be one of the worst years for the industry.
Well, it’s pretty much guaranteed that there will be no miracle occurring.
The stock market has been clobbered since the election, and the timing couldn’t be worse.
This week, BofA/ML released the results from their latest hedge fund manager survey and found:
Hedge fund net exposure to the equities is 40%, the highest Jun’07!
Ominously, our backtesting since Jul’07 shows that whenever hedge fund exposure is >35%, S&P 500 tends to consolidate 4-5% and underperform UST 10yr by 700bps over the subsequent 4 weeks.
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