The beta of US diversified bond funds to the benchmark has fallen back toward average levels, suggesting that positioning at bond funds is much cleaner. The rise in correlation between duration and credit has affected the relative positioning measures of both, but exposures look to have been reduced. Indeed, unlike the taper tantrum, bond funds continue to modestly outperform the benchmark as fixed income has sold off. This implies that overweight in duration and credit risk are less of an issue than in 2013.
The relative value hedge funds cut positioning before the recent bond selloff and that performance has been relatively flat throughout the volatility, observes Barclays. Unlike in 2013, this suggests that hedge fund positioning is not overly long fixed income and duration. Similarly, macro/CTA funds have performed better, despite the last leg up in rates, confirming the view that macro fund positioning is more overweight the dollar and equities than rates, states Barclays.
