Bearish Hedge Funds
Hedge Funds Most Bearish Since 2009 as Stocks Slide
Hedge funds are the most bearish they have been since 2009, according to recent data. Reports of an economic slowdown in the US and the European debt crisis have led many hedge fund managers to favor short selling over long bets. Hedge fund short selling activity is reportedly at the highest level in two years.
An index of hedge fund assets from International Strategy & Investment Group dropped to 45.8 on Aug. 16, showing the most short selling in two years, down from a 2011 high of 54.2 in February. The research firm and broker-dealer surveys 35 hedge funds with about $84 billion under management every week.
Professional investors are selling after the MSCI All- Country World Index dropped 15 percent since July 22 and the Standard & Poor’s 500 Index posted record swings. Equities fell yesterday after Lars Frisell, the chief economist at Sweden’s financial regulator, said it won’t take much for interbank lending to freeze, and data showed the U.S. economy is stalling.
“Hedge funds are sensing a European fiscal denouement on the horizon and they understand that contagion can hit the U.S. very quickly,” Steve Shafer, who helps manage $300 million as chief investment officer of Oklahoma City-based Covenant Investors, said in a telephone interview. “Hedge funds are pretty nimble traders with a short-term focus, so they’re protecting what they’ve got and they are preparing for a potential capitulation of the market.” Source
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