Hedge Funds Cut Bets
Hedge Funds Cut Bets in May As Stock Market, Euro Struggle
The instability in the stock market and the struggling euro caused hedge funds to cut back bets in the last few weeks. Hedge funds have reduced leverage and positioned themselves defensively in what has been a tough month of May. Still, hedge funds aren't reverting to their caution in the midst of the financial crisis.
Hedge funds are now positioned defensively with lower levels of borrowing, said Campiche, who oversees more than $8 billion invested in portfolios of hedge funds.
He thinks global macro managers are best placed to profit from the turbulence.
"The first week of May was difficult," Campiche said in an interview late on Monday. "Since then managers have derisked quite aggressively. Like everyone, they don't have a clue where things are heading so they've reduced their balance sheet.
"Right now, leverage is very low," he added. "Funds are playing defence but there's no panic... Everyone is much more on their toes."
However, funds are still not as cautious as during the nadir of the credit crisis in late 2008 and early 2009, he added.
Hedge fund long leverage was just over 1.5 times in October 2008, according to data from Britain's Financial Services Authority, rising to 1.78 times by October 2009. Source
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