A short roundup of what institutional investors and asset managers have been investing in and divesting from during the last months.
Most asset managers do not believe that the current equity rally is finished. Moreover, US and European shares are not assumes not to be overvalued.
Especially hedge funds are increasing their equity exposure. Market neutral hedge funds, which are theoretically holding equal amount of long and short positions, have increased their exposure to equities to 18% net long. Global macro funds are increasing their long positions in indexes especially in the S&P 500 and the Nasdaq Composite.
On the other hand, funds are divesting from debt. 65% of asset managers believe that the current credit rally will not continue, says a report from Lyxor. This is due to increasing caution about US credit and further accommodative monetary policies of central banks resulting in low interest rates.
Commodities, especially crop and soybeans are disliked by funds as well. Both are trading close to a four year low in Chicago and are likely to fall further as hedge funds close out bets on future rallies, says data from the US Commodity Future Trading Commission. In the last weeks, bullish bets are closed as prices dropped.
Falling prices may as well result of the high expected supply due to the good weather and soon harvest. Corn is expected to reach the second highest harvest in records.