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Hedge Funds Buy Individuals Sell

Hedge Funds Buy Individuals Sell

Hedge Funds Buying As Individuals Sell Stock

Individuals are selling at the fastest rate this year while hedge funds are doing the exact opposite which could possibly signal coming gains in the S&P 500.  Since August, $37.3 billion has been withdrawn from US mutual funds as nervous individual investors cash out.  Hedge funds, on the other hand, have been increasing stakes and buying up new investments hoping to make large returns on the turbulent market.

“The more sophisticated investors are seeing the opportunity, but retail investors are still scarred,” said James Dunigan, the Philadelphia-based chief investment officer for the wealth management division at PNC Financial Services, which oversees $104 billion. “It suggests that the rally still has room to go.”

Before credit markets started to freeze in August 2007, the last time mutual funds saw outflows this big was in the nine months up to February 2003, just as the S&P 500 began a five- year rally. Now, the sales are offering opportunities to Paulson & Co., Christofferson Robb & Co. and Passport Capital Management LLC to bet the more than $11 trillion lent, spent or guaranteed by the U.S. government to end the recession will lift stocks.

Individuals, who account for 82 percent of mutual fund owners, took $21.4 billion more out of equities than they’ve added and put $312.8 billion into bonds this year through the end of October, according to Washington-based ICI.  Source

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