SocGen Hedge Fund Research

6 April 2010
Global Asset Allocation

Monthly
www.sgresearch.com
SG Hedge Fund Watch

Very, very long on the US$ against , UK£ and Y
Much longer on Nasdaq and much shorter on Bonds

Strategist
Alain Bokobza
(33) 1 42 13 84 38
Q Equity & Equity volatility: Funds have clearly and taken very significant long positions on
alain.bokobza@sgcib.com
US$ assets, especially the Nasdaq, an asset that we also favour. They have also substantially
Strategist
Roland Kaloyan
reduced their net shorts on the S&P500, but maintain a significant net short on small caps.
(33) 1 58 98 04 88
roland.kaloyan@sgcib.com
Q Currencies: Since the creation of the euro (January 1999), Funds have never so
Strategist
Arthur van Slooten aggressively sold the Eurozone currency (80,000 contracts net short). Ahead of the UK
(33) 1 42 13 45 06
arthur.van-slooten@sgcib.com election, they have increased their net shorts against Sterling. Overall, they are extensive
Research associate buyers of the US dollar against the Japanese yen.
Ida Troussieux
(44) 20 7762 5177
ida.troussieux@sgcib.com
Q Bonds & Money Markets: While maintaining a significant position against 30-Year bonds,
Specialist Sales Funds have very recently but substantially increased their net shorts against the 10-Year US
Paul Jackson
(44) (0) 20 7762 5921 bond. They appear to be anticipating - as we do - growing fears of inflation and the first rate
paul.jackson@sgcib.com
hike by the very end of this year.
Q Energy and commodities: In spite of being significantly net long the US dollar, Funds are
also very long the commodity asset class, strongly disrupting the natural negative correlation
between the two assets. They have recently somewhat reduced their positions on gold
Contents (although these remain long overall), switching into oil and copper, while staying away from
2-3 - Equity & Volatility
wheat (strong net shorts).
4- Bonds & Money Market
5- Currencies
6-7- Energy & Commodities
8-9- LT view (since 1993)

10 year Bonds – a strong increase in net shorts Nasdaq – significant long positions
10- Methodology
50 B uyer o f 10 Year T-No tes x 1000 50 20 20

B uyer o f Nasdaq x1000
15 15
-50 -50 10 10
-100 -100 5 5
-150 -150 0 0
-200 -200 -5 -5
Seller o f 10 Year T-No tes
-250 -250 -10 Seller o f Nasdaq -10
M ar M ay Jul Sep No v Jan M ar M ar M ay Jul Sep No v Jan M ar
(contracts of $100,000 face value) Net positions on NASDAQ 100: Combination of standard ($100)
Source: SG Cross Asset Research, CFTC contracts and E-Mini contracts ($20)
Source: SG Cross Asset Research, CFTC
In this report “hedge funds” refers to all non-commercial positions reported to the CFTC.
Latest data as of 26/03/2010, released 30/03/2010.
Macro Commodities Forex Rates Equity Credit Derivatives

Please see important disclaimer and disclosures at the end of the document
SG Hedge Fund Watch
US Equities
(net positions, positions as % of total Ol (E-Mini contracts inc.), price over the last 12 mths)
Hedge fund net positions on S&P 500 S&P 500 price & non-commercial positions on
total open interest (OI)
Over the last two weeks, hedge 60 x1000 60 20% S&P500 rises (rhs) 1200
B uyer o f S&P 500
funds have more than halved their
40 40 18%
net short positions on the S&P.
16% 1000
20 20
14%
0 0
12% 800
-20 -20
10% S&P500 falls (rhs)
Seller o f S&P 500
-40 -40 8% 600
M ar M ay Jul Sep No v Jan M ar Mar May Jul Sep Nov Jan Mar
Net positions on S&P 500: Combination of standard ($250) contracts S&P500 price: black line, rhs,
and E-Mini contracts ($50) Non commercial OI includes S&P500 E-Mini total open interest
Source: SG Cross Asset Research, CFTC Source: SG Cross Asset Research, CFTC
Hedge fund net positions on Nasdaq Nasdaq price and non-commercial positions on
20 20 40% Nasdaq rises (rhs) 2000

B uyer o f Nasdaq x1000
A further increase in already 15 15
1800
significantly long positions on the 30%
10 10
NASDAQ. 1600
5 5 20%
1400
0 0
10%
-5 -5 1200
Nasdaq falls (rhs)
-10 Seller o f Nasdaq -10 0% 1000
Net positions on NASDAQ 100: Combination of standard ($100) Nasdaq 100 price: black line, rhs
contracts and E-Mini contracts ($20) Non commercial OI includes NASDAQ 100 E-Mini total OI
Hedge fund net positions on Russell 2000 Russell 2000 price and non-commercial
positions on total open interest (OI)
20 x1000 20 25% Russell2000 rises (rhs) 700

B uyer o f Russell 2000
0 0
21%
600
-20 -20
17%
-40 -40 500
13%
-60 -60
400
-80 -80 9%
Russel2000 falls (rhs)
Seller o f Russell 2000
-100 -100 5% 300
Net positions on Russell 2000: E-Mini contracts on ICE ($100) Russell 2000 price: black line, rhs
2 6 April 2010
SG Hedge Fund Watch
Equity volatility & Equities

(net positions, positions as % of total Ol, price over the last 12 mths)
Hedge fund net positions on VIX VIX price and non-commercial positions on total
open interest (OI)
10 Buyer of Vix x 1000 10 50% Vix rises (rhs) 60
40%
48
30%
-10 -10 36
20%
-20 -20 24
10%
Seller of Vix Vix falls (rhs)
-30 -30 0% 12
M ar M ay Jul Sep Nov Jan M ar Mar May Jul Sep Nov Jan Mar
(VIX X $100.00), dashed line: no reported data VIX price: black line, rhs, dashed line: no reported data
Hedge fund net positions on Nikkei Nikkei price and non-commercial positions on
12 B uyer o f Nikkei x 1000 12 40% Nikkei rises (rhs) 13,000
8 8
30% 11,000
4 4
20% 9,000
-4 -4
Seller o f Nikkei Nikkei falls (rhs)
-8 -8 10% 7,000
M ar M ay Jul Sep No v Jan M ar M ar M ay Jul Sep Nov Jan M ar
(Nikkei X $5.00) Nikkei price: black line, rhs

6 April 2010 3
SG Hedge Fund Watch
Bonds
Hedge fund net positions on US 10Y Treasury US 10Y T-Bond yield and non-commercial
A remarkable increase in net Notes positions on total open interest (OI)
shorts against 10-year USD
bonds. 50 B uyer o f 10 Year T-No tes x 1000 50 25% 10y T-B o nd yield rises (rhs) 4.8
20% 4.0
-50 -50
-100 -100 15% 3.2

-150 -150
10% 2.4
-200 -200
Seller o f 10 Year T-No tes 10y T-B o nd yield falls (rhs)
-250 -250 5% 1.6
(contracts of $100,000 face value) US 10Y T Bonds yield in %: black line, rhs
Hedge fund net positions on US 30Y T Bonds US 30Y T-Bond yield and non-commercial
40 x 1000 40 20% 30 Year T-Bond yield rises (rhs) 4.9

B uyer o f 30 Year T-B o nds
18% 4.5
4.1
-40 -40 16%
3.7
-80 -80 14%
3.3
-120 -120 12% 2.9
Seller o f 30 Year T-B o nds 30 Year T-Bond yield falls (rhs)
-160 -160 10% 2.5
Hedge fund net positions on 30-Day Fed Funds 30-Day Fed Funds price and non-commercial
positions on total OI
160 B uyer o f 30 Day FedFunds x 1000 160 40% 30 Day Fed Funds price rises (rhs) 100
Expect lo wer Fed rates
35%
110 110
30%
60 60 25% 99.75
20%
10 10
15% 30 Day Fed Funds price falls (rhs)
Seller o f 30 Day FedFunds
-40 Expect higher Fed rates -40 10% 99.5
(interest on $5,000,000 Fed Funds) 30-Day Fed Funds price: black line, rhs
Hedge fund net positions on interest rate SWAPs Interest rate SWAPs 10Y-3M price and non-
10Y-3M commercial positions on total OI
8 x 1000 B uyer o f interest rate SWA P s 10Y-3M 8 44% Price rise of 10Y- 3M Interest rate 130
SWAPs (rhs)
34% 120
4 4
24% 110
14% 100
Price fall of 10Y-3M IRS (rhs)
Seller o f interest rate SWA P s 10Y-3M
-4 -4 4% 90
M ar M ay Jul Sep No v Jan M ar M ar M ay Jul Sep Nov Jan M ar
(contracts of $100,000 notional principal) IRS 10YR – 3MO price: black line, rhs
4 6 April 2010
SG Hedge Fund Watch
Currencies
Hedge fund net positions on €/$ €/$ price and non-commercial positions on total
Aggressively selling the euro: open interest (OI)
hedge funds are now 80,000 60 x 1000 60
S eller o f $ agains t E uro 42% EUR weakens (rhs) 1.55
contracts net short. 40 40
38% 1.50
20 20
1.45
34%
1.40
-20 -20 30%
1.35
-40 -40 26%
1.30
-60 -60
22% 1.25
-80 B uyer o f $ agains t E uro -80 EUR strengthens (rhs)
-100 -100 18% 1.20
M ar M ay J ul S ep Nov J an M ar M ar M ay Jul Sep No v Jan M ar
(contracts of €125,000) €/$ price: black line, rhs

Hedge fund net positions on £/$ £/$ price and non-commercial positions on total
open interest (OI)
20 S eller o f $ agains t £ x 1000 20 50% GB P weak ens (rhs ) 1.90
45% 1.80
40% 1.70
-20 -20
35% 1.60
-40 -40
30% 1.50
-60 -60 25% 1.40
B uyer o f $ agains t £ GB P s trengthens (rhs )
-80 -80 20% 1.30
M ar M ay J ul S ep Nov J an M ar M ar M ay J ul Sep No v J an M ar
(contracts of £62,500) £/$ price: black line, rhs

Hedge fund net positions on SF/$ $/SF price and non-commercial positions on
30 Seller of $ against SF x 1000 30 45% SF weak ens (rhs ) 1.20
1.15
20 20
35%
1.10
10 10
25% 1.05
1.00
15%
-10 -10
0.95
SF s trengthens (rhs )
-20 Buyer of $ against SF -20 5% 0.90
M ar M ay Jul Sep No v Jan M ar M ar M ay J ul Sep Nov J an M ar
(contracts of SF125,000) SF/$ price: black line, rhs

Hedge fund net positions on yen/$ Yen/$ price and non-commercial positions on
Hedge funds are strong buyers of 70 Seller of $ against JPY x 1000 70 45% JP Y weakens (rhs) 110
the USD, also against the
40% 105
Japanese yen. 50 50
35% 100
30 30
30% 95
10 10
25% 90
-10 -10 JP Y strengthens (rhs)
20% 85
Buyer of $ against JPY 15% 80
-30 -30
Mar May Jul Sep Nov Jan Mar M ar M ay Jul Sep No v Jan M ar
Source: CFTC (contracts of ¥12,500,000) Source: CFTC yen/$ price: black line, rhs
6 April 2010 5
SG Hedge Fund Watch
Energy
Hedge fund net positions on crude oil Crude oil price and non-commercial positions on
Hedge funds are very long total open interest (OI)
commodities, including oil
160 B uyer o f crude o il x 1000 160 44% Crude o il rises (rhs) 115
120 120 42% 100

40%
80 80 85
38%
40 40 70
36%
55
34%
-40 -40 32% 40
Crude o il falls (rhs)
-80 Seller o f crude o il -80 30% 25
(contracts of 1,000 barrels) WTI crude oil price: black line, rhs
Source: SG Cross Asset Research, CFTC Source: SG Cross Asset Research, CFTC;
Hedge fund net positions on Natural Gas Natural Gas price and non-commercial positions
on total OI
30 B uyer o f Natural Gas x1000 30 55% Natural gas Strengthen (rhs) 7
10 10 53% 6
-10 -10 51% 5
-30 -30 49% 4
-50 -50 47% 3

Sellers o f Natural Gas Natural gas weakens (rhs)
-70 -70 45% 2
Net positions on Natural Gas: Combination of standard (10,000 British Natural Gas price black line, rhs
Thermal Units) contracts and Henry Hub Swap contracts (2,500 BTU) Source: SG Cross Asset Research, CFTC
Source: SG Cross Asset Research, CFTC
6 6 April 2010
SG Hedge Fund Watch
Commodities
Hedge fund net positions on gold Gold price & non-commercial position on total
open interest (OI)
Still bullish on gold, despite the
280 B uyer o f go ld x 1000 280 49% Go ld rises (rhs) 1,300
recent reduction in net long
positions. 230 230 45% 1,200
180 180
41% 1,100
130 130
37% 1,000
80 80
30 30 33% 900
Go ld falls (rhs)
-20 Seller o f go ld -20 29% 800
(contracts of 100 troy ounces) Gold price: black line, rhs

Hedge fund net positions on copper Copper price and non-commercial positions on
30 B uyer o f co pper x 1000 30 41% Co pper rises (rhs) 360

20 20
300
10 10 37%
240
-10 -10 33%
180
-20 -20
Co pper falls (rhs)
-30 Seller o f co pper -30 29% 120
(contracts of 25,000 pounds) Copper price: black line, rhs

Hedge fund net positions on wheat Wheat price and non-commercial positions on
20 Buyer of wheat x 1000 20 50% Wheat rises (rhs) 700

10 10
45%
-10 -10 600
40%
-20 -20
-30 -30
35%
-40 -40 500
-50 -50 30%
-60 Seller of wheat -60 Wheat falls (rhs)
-70 -70 25% 400
M ar M ay Jul Sep Nov Jan M ar M ar M ay Jul Sep No v Jan M ar
(contracts of 5,000 bushels) Wheat price: black line, rhs

6 April 2010 7
SG Hedge Fund Watch
Hedge fund net positions since 1993

(net positions, positions as % of total Ol (E-Mini contracts inc), price)
Hedge fund net positions on S&P 500 S&P 500 price & non-commercial position on
100 100 24% 18 0 0
buyer of S&P500 x1000
20% 150 0
50 50
16 % 12 0 0
0 0
12 % 900
-50 -50
8% 600
-100 seller of S&P500 -100

4% 300
-150 -150 0% 0
93 95 97 99 01 03 05 07 09 93 95 97 99 01 03 05 07 09 11
Net positions on S&P 500: Combination of standard ($250) contracts S&P500 price: black line, rhs,
and E-Mini contracts ($50) Non-commercial OI includes S&P500 E-Mini total open interest
Hedge fund net positions on NASDAQ 100 NASDAQ 100 and non-commercial positions on
30 30 60% 50 0 0
x1000
B uyer o f Nasdaq
20 20 50 %
4000
10 10
40%
0 0 3000
30%
-10 -10
2000
20%
-20 -20
Seller o f Nasdaq 10 0 0
-30 -30 10 %
-40 -40 0% 0
96 98 00 02 04 06 08 10 96 98 00 02 04 06 08 10
Start date: 16/04/1996 Start date: 16/04/1996

Net positions on NASDAQ 100: Combination of standard ($100) NASDAQ 100 price: black line, rhs
contracts and E-Mini contracts ($20) Non-commercial OI includes NASDAQ 100 E-Mini total OI
Hedge fund net positions on crude oil Crude oil price and non-commercial positions on
x 1000 50% 150

180 B uyer o f Crude Oil
140 130
40%
100 110
30%
60 90
20 70
20%
-20 50
-60 10%
30
Seller o f Crude Oil
-100
0% 10
93 95 97 99 01 03 05 07 09 11 93 95 97 99 01 03 05 07 09 11
Source: SG Cross Asset Research, CFTC (contracts of 1,000 barrels) Source: SG Cross Asset Research, CFTC; crude oil price: black line,
rhs
8 6 April 2010
SG Hedge Fund Watch
Hedge fund positions since 1993

(net positions, positions as % of total Ol, price)
Hedge fund net positions on €/$ €/$ price and non-commercial positions on total
open interest (OI)
120 120 45% 1.7
B uyer o f Euro against $ x 1000
100 40% 1.6
70 1.5
80 35%
1.4
60 20 30%
1.3
40 25%
1.2
20 -30
20%
1.1
15%
Seller o f Euro against $ -80 1.0
-20 10% 0.9
-40 -130 5% 0.8
99 00 01 02 03 04 05 06 07 08 09 10 99 00 01 02 03 04 05 06 07 08 09 10
Data from 1999 Data from 1999

Source: SG Cross Asset Research, CFTC (contracts of €125,000) Source: SG Cross Asset Research, CFTC; €/$ price: black line, rhs
Hedge fund net positions on US 10Y Treasury US 10Y T-Notes price and non-commercial
Notes positions on total open interest (OI)
700 B uyer o f 10 Year T-No tes x 1000 700 32% 8.0
600 600 28%

7.0
500 500
24%
400 400
6.0
300 300 20%
200 200 16% 5.0

100 100
12%
4.0
8%
-100 -100
3.0
-200 -200 4%
Seller o f 10 Year T-No tes
-300 -300 0% 2.0
93 95 97 99 01 03 05 07 09 11 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Source: SG Cross Asset Research, CFTC Source: SG Cross Asset Research, CFTC;
(contracts of $100,000 face value) US 10Y Treasury Notes yield in %: black line, rhs
Hedge fund net positions on US 30Y T Bonds US 30Y T-Bond yield and non-commercial
160 B uyer o f 30 Year T-B o nds x 1000 32% 8
120 28%
7
80 24%
40 6
20%
16% 5
-40
12%
-80 4
-120 8%
3
-160 4%
Seller o f 30 year T-B o nds
-200 0% 2
93 95 97 99 01 03 05 07 09 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
6 April 2010 9
SG Hedge Fund Watch
Appendix
CFTC: Commodity Futures Trading Commission

The mission of the Commodity Futures Trading Commission (CFTC) is to protect market users
and the public from fraud, manipulation, and abusive practices related to the sale of
commodity and financial futures and options, and to foster open, competitive, and financially
sound futures and option markets.
The CFTC assures the economic utility of the futures markets by encouraging their
competitiveness and efficiency, ensuring their integrity, protecting market participants against
manipulation, abusive trading practices, and fraud, and ensuring the financial integrity of the
clearing process. Through effective oversight, the CFTC enables the futures markets to serve
the important function of providing a means for price discovery and offsetting price risk.
How to read the way SG monitors hedge fund positions

CFTC definitions:
Net position The difference between the open long contracts and the open short contracts
held by a trader in any one commodity. Data we use have at least a one week lag with real
positions.
Open interest The total number of futures contracts long or short in a delivery month or
market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled
by delivery.
Time horizon:
ST view (12 months) & LT view (since 1993)
E-Mini Futures contracts and US equity index Futures contracts on CME

Futures on the S&P500, the Nasdaq and Russell 2000 come in two sizes; the large ones are
the standard futures that continue to trade on the floor of the Chicago Mercantile Exchange
(CME); the smaller ones are E-Mini futures (1/5 of the size of a standard CME futures) where
trade is fully electronic. Trading volume in standard futures has now been surpassed by that of
E-Minis, which are now the most highly-traded stock-index futures in the world.
E-Mini S&P 500 futures are legally binding agreements to buy or sell the cash value of the
S&P500 Index at a specific future date. The contracts are valued at $50 x the future price. For
example, if the Mini S&P 500 future price is at 920.00, the value of the contract is $46,000
($50.00x920.00).
On US equity index graphs of this report, we have decided to combine the two contracts.
Example for the S&P500:
We add 1/5 of the E-Mini futures ($50) to the standard contracts ($250).
(S&P 500 Standard X $250.00) +(1/5 E-Mini S&P 500 X $50.00)
10 6 April 2010
SG Hedge Fund Watch
A specific Future contract for each asset class

S&P 500 stock index - Chicago Mercantile Exchange (S&P 500 index x $250.00)
E-Mini S&P 500 stock index - Chicago Mercantile Exchange (S&P 500 index x $50.00)
NASDAQ -100 stock index - Chicago Mercantile Exchange (NASDAQ 100 index x $100)
E-Mini NASDAQ -100 stock index - Chicago Mercantile Exchange (NASDAQ 100 index x $20)
E-Mini Russell 2000 stock index future – InterContinental (Russell 2000 index x $100)
Exchange.
VIX futures - CBOE futures exchange ($100 x VIX)
Nikkei stock average - Chicago Mercantile Exchange (Nikkei index x $5.00)
Wheat - Chicago Board of Trade (contracts of 5,000 bushels)
Crude oil, light sweet - New York Mercantile Exchange (contracts of 1,000 barrels)
Natural Gas - New York Mercantile Exchange (contracts of 10,000 British Thermal Units)
Henry Hub Gas Swap - New York Mercantile Exchange (contracts of 2,500 British Thermal Units)
Copper-grade #1 - Commodity Exchange inc. (contracts of 25,000 pounds)

Gold - Commodity Exchange inc. (contracts of 100 troy ounces)
30-day federal funds - Chicago Board of Trade (interest on $5,000,000 fed funds)
Interest rate swaps 10 yr - 3m - Chicago Board of Trade (contracts of $100,000 notional principal)
US Treasury bonds - Chicago Board of Trade (contracts of $100,000 face value)
10-year US Treasury notes - Chicago Board of Trade (contracts of $100,000 face value)
British pound sterling - Chicago Mercantile Exchange (contracts of £62,500)
Japanese yen - Chicago Mercantile Exchange (contracts of ¥12,500,000)
Swiss franc - Chicago Mercantile Exchange (contracts of SF125,000)
Euro fx - Chicago Mercantile Exchange (contracts of €125,000)
Source: SG Equity Research
6 April 2010 11
SG Hedge Fund Watch
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6 April 2010

Global Asset Allocation

SG Hedge Fund Watch

Much longer on Nasdaq and much shorter on Bonds

6-7- Energy & Commodities

8-9- LT view (since 1993)

50 B uyer o f 10 Year T-No tes x 1000 50 20 20

Macro Commodities Forex Rates Equity Credit Derivatives

20 20 40% Nasdaq rises (rhs) 2000

20 x1000 20 25% Russell2000 rises (rhs) 700

Equity volatility & Equities

10 Buyer of Vix x 1000 10 50% Vix rises (rhs) 60

12 B uyer o f Nikkei x 1000 12 40% Nikkei rises (rhs) 13,000

(Nikkei X $5.00) Nikkei price: black line, rhs

-100 -100 15% 3.2

40 x 1000 40 20% 30 Year T-Bond yield rises (rhs) 4.9

(contracts of €125,000) €/$ price: black line, rhs

20 S eller o f $ agains t £ x 1000 20 50% GB P weak ens (rhs ) 1.90

(contracts of £62,500) £/$ price: black line, rhs

(contracts of SF125,000) SF/$ price: black line, rhs

120 120 42% 100

30 B uyer o f Natural Gas x1000 30 55% Natural gas Strengthen (rhs) 7

-10 -10 51% 5

-30 -30 49% 4

-50 -50 47% 3

(contracts of 100 troy ounces) Gold price: black line, rhs

30 B uyer o f co pper x 1000 30 41% Co pper rises (rhs) 360

(contracts of 25,000 pounds) Copper price: black line, rhs

20 Buyer of wheat x 1000 20 50% Wheat rises (rhs) 700

(contracts of 5,000 bushels) Wheat price: black line, rhs

Hedge fund net positions since 1993

-100 seller of S&P500 -100

Start date: 16/04/1996 Start date: 16/04/1996

x 1000 50% 150

Hedge fund positions since 1993

Data from 1999 Data from 1999

600 600 28%

200 200 16% 5.0

CFTC: Commodity Futures Trading Commission

How to read the way SG monitors hedge fund positions

E-Mini Futures contracts and US equity index Futures contracts on CME

A specific Future contract for each asset class

Copper-grade #1 - Commodity Exchange inc. (contracts of 25,000 pounds)

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