Hedge Fund Monitor：Macro go long EM exposures & short 10-Year Treasury’s

c58da9b710df662c Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 20 to 22. Analyst Certification on Page 19. Link to Definitions on page 19. 10965663 Hedge Fund Monitor Macro go long EM exposures & short 10-Year Treasury’s „ Global diversified HF index up 1.49% in July The best performing strategies in July were Event Driven (up 2.50%) and Equity Long/Short (up 2.28%). Short Bias (down 4.16%) and Macro (down 0.07%) were the worst performing strategy for the same period. For details, please refer to performance data starting at page 14. Examining HF positioning by major strategies Equity Long/Short funds slightly increased market exposure to roughly 21% net long last week, below the historical average range (35-40%). Market Neutral funds slightly increased equity exposure to above a 50% long / 50% short benchmark. Models indicate Macro HFs reduced their short in US equities and bought EM exposures and remained short 10-Year Treasury notes. Significant HF moves across asset classes based on CFTC data Equities. Large specs slightly covered their short positions in SPX and Russell 2000 positions, while adding to their net long positions in NDX to a near crowded long position (pg 7). Metals. Large specs slightly bought gold, sold silver and held steady their net long positions in platinum. They also bought copper into a crowded long (pp 8-9). Energy. HFs slightly sold gasoline futures, heating oil and bought crude. Large specs continued to cover their crowded short in natural gas (pp 10-11). Forex. HFs continued to cover their shorts in the euro last week; They added ontotheir crowded long in US dollar and JPY (pg 12). Interest Rates. HFs aggressively covered their short positions in the 30-Yr and moved out of crowded short in 10-Yr Treasuries. They also bought 2-Yr Treasuries into a net long (pg 13). (Note: Commitment of Traders data reflect positions as of last Tuesday) Hedge Fund Composite Index performance to 11 August 2010 1 Week 1 Month 3 Months 6 Months 1 Year MTD QTD YTD Curr DD† Diversified Hedge Funds * -0.30%0.64%0.46%0.13%4.88%-0.19%1.04%-0.17%-15.82% Convertible Arbitrage * 0.48%1.80%2.91%4.18% 13.67% 0.66% 2.25% 4.21% -22.83% Event Driven -0.26%-0.01%0.41%0.97% 6.10% -0.45% 0.45% 0.51% -18.87% Equity Market Neutral # -1.48%-2.24%-2.21%0.14% -1.43% -2.02% -1.90% -0.01% -13.99% Equity Long/Short -1.01%0.62%1.70%0.63% 2.90% -0.41% 1.86% -0.40% -25.26% Macro * 0.27%0.25%-2.15%-1.14% -5.55% -0.10% -0.73% -3.03% -18.97% CTA Advisors ** 0.37%1.69%0.28%2.27% -2.12% 0.80% 0.37% 1.21%-4.43% Merger Arbitrage -1.00%-0.72%0.76%0.73% 2.97% -0.57% 0.46% -0.10%-2.38% Source: BofA Merrill Lynch Global Research, Bloomberg; †Current Drawdown, *Only HFRX daily index as of 2Q09; **Only AERIAEST index as of 2Q09 ;#Only HFRX daily index as of Nov 09 Market Analysis Market Analysis | Global 16 August 2010 Mary Ann Bartels +1 646 855 0206 Technical Research Analyst MLPF&S maryann.bartels@baml.com Summary of significant HF positions Large specs positioning across asset classes Very Long Very Short Equities Metals Copper Commodities Heating oil Natural gas Currencies US$, JPY Rates Source: BofA Merrill Lynch Global Research, Bloomberg Hedge Fund Monitor 16 August 2010 2 Equity Market Neutral Exposure Analysis Estimated Equity Market Neutral Exposure as of 11 August 2010 Annualized Daily Returns of Equity Mkt Neutral Composite 12m Return Last 3 m Return Last 1m Return Market Direction Avg Composite Index Return On Days When Market Rises 12.1%6.9% -12.3%Avg Composite Index Return On Days When Market Falls -8.4%-21.3% -36.1%Return Spread 20.5%28.2% 23.8%Style Avg Composite Index Return On Days When Value Outperforms 10.4%11.3% -12.7%Avg Composite Index Return On Days When Growth Outperforms -17.8%-22.0% -30.4%Return Spread 28.3%33.3% 17.7%Size Avg Composite Return On Days When Large Cap Outperforms -15.6%-11.9% -26.1%Avg Composite Return On Days When Small Cap Outperforms 10.3%-0.8% -20.7%Return Spread -25.9%-11.0% -5.4%Quality Avg Composite Return On Days When Low Quality Outperforms 11.9%9.9% -47.9%Avg Composite Return On Days When High Quality Outperforms -14.3%-20.9% -14.0%Return Spread -26.2%-30.8% 33.9%Inflationary Expectations Avg Composite Return On Days When Inflationary Stocks Outperf 0.0%-26.4% -35.4%Avg Composite Return On Days When Disinflation Stocks Outperf -7.3%22.8% -3.3%Return Spread 7.3%-49.2% -32.1%Source: BofA Merrill Lynch Global Research, Bloomberg Significant estimated factor exposures for Equity Market Neutral funds „ M/N hedge funds market exp