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.