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According to the WSJ:


The fast money is proving slow to jump on the market’s bandwagon.

Hedge funds, decried by many as quick traders, have played catch-up during the market rally since March. The average fund was 45% “net long” as of May 19, or had investment holdings valued at 45% more than its bearish “short” positions, according to Hedge Fund Research.

That figure is up from 33% earlier this year, but still is far below its 55% level a year ago. Funds are less bullish now than they were just before the market crumbled last fall.



Hedge-fund managers, and their investors, said many remain in a neutral position. Hedge funds tend to underperform stock-market averages at inflection points, in part because they aim to create a “hedged” performance, rather than ape the market.

While a stock surge might force a mutual-fund manager to jump in because he is judged against the index, the pressure on hedge funds is less.

Many funds are skeptical the economy has entered a new period of growth that justifies high equity multiples. Others fear dislocations from governments shoveling money at problems.

Some noted stock pickers remain wary.

Steve Mandel’s Lone Pine Capital bought long-dated, out-of-the-money call positions representing 2.6 million shares of a gold exchange-traded fund in the first quarter, while Och-Ziff Capital Management Group and Atticus Capital have been cautious on the market. A call option is the right to buy a security at a certain price.

If stocks keep surging, hedgies might have to jump in with two feet, giving the market another lift. But their continued hesitancy should be a sign of caution for investors.

Could this be potential fuel for the rally to continue?

  1. prescient11

    TPC, I don’t know if I’d see it as more potential fuel, although I guess it could be. IMHO this is the big caution flag. Most pros I know are really getting set for what they think the fall will be 2H 09. It’s not getting better man, plain and simple. We’ll muddle through this but a V shaped recovery is not in the fucking cards. The shit that continues to happen in the equities market is like 12 monkeys fucking a football. Eventually someone takes away the football.

  2. Cullen Roche

    You know my stance. I agree with you, but that doesn’t mean this rally can’t continue in the near-term. This market certainly has a feeling like there’s a lot of money waiting to buy any down side….

  3. Larry

    game ends this week….

    email making rounds between the hedge funds….

    ride it up, ride it down

    the down memo pile on game was just circulated….

    if you dont believe me, i feel sorry for you if you are long…..

  4. prescient11

    While I respect TPC’s concerns about more fuel, I do feel this is ending soon. Look at Mish’s recent post on losses still to come. We are not even halfway through this… How are we going to deal with that many more losses? It’s unbelievable.

    So, I have no idea what happens and try to be in cash every day at close. Although I loaded up some FAZ and SDS AH on Friday, was out of the office and I saw that complete bullshit move and said, eh, let’s roll the dice.

    I should know better, GM bk filing will rally this market another 100 points… LOL. It is getting pretty scary out there fellas.

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