Chart 1: Fund manager variance & intensity is at the highest level ever!
According to National Association of Active Investment Managers, net long exposure is incredibly high and intensity amongst fund managers has now risen towards record high over the last two month span.
Since various fund managers have the ability to answer the survey with a range of responses ranging from 200% Leveraged Short all the way towards 200% Leveraged Long (and anything in between), what the intensity indicator tries to accomplish is to see how much variance there is among the fund managers taking part in the survey. The less variance there is, the more group think herding there is going on and usually when everyone is on one side of the boat, it is usually better to be on the other side.
Over the last several weeks, the most bullish managers have been fully invested and highly leveraged on the long side, with exposure ranging from 150% all the way to 170% net long. What is even more interesting, the most bearish managers have not been bearish at all. Their exposure has ranged from 0% (market neutral) to anything from 15% to 50% net long.
In other words, the most bearish fund managers, who are usually acting as short sellers or hedgers, have actually capitulated and turned their portfolios towards the net long side as well. At least according to this survey, over the last several weeks, even the biggest of bears have thrown in the towel and when everyone is on one side of the boat…