Monday, November 17, 2008

Hedge Funds Raising Cash

Lots of reports have contributed the huge market declines in Sept and Oct to liquidations and forced selling by hedge funds. Based on this article, it's becoming very clear that alot of hedge funds have over liquidated. Though funds aren't required to report cash positions the numbers add up to a good portion of funds already having sizeable cash positions. In some cases such as BP Capital, funds have already moved to mostly cash.

These drastic moves put alot of cash available for reinvesting in the market once a rebound occurs. Adds more fuel to the argument that an eventual rally could be just as fast as the deline. Below are some samples of firms that have drastically reduced their reporting holdings during Q3 and in most cases the cash position has been identified as 30, 40, 50% and sometimes even more. That money can't remain on the sidelines forever and at least for these funds the selling will be limited going forward.

  • Hedge-fund manager David Tepper entered the third quarter with $3.1 billion of U.S. stocks and exited with $648 million, selling most holdings to reduce risk and raise cash as carnage spread across the financial markets. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.
  • Atticus Capital LP, based in New York, disclosed that its holdings declined to $510 million from $8.1 billion. The firm, run by Timothy Barakett, 43, sold out of 39 stocks while adding no new holdings. ConocoPhillips, MasterCard Inc. and Burlington Northern Santa Fe Corp. were the three largest positions he exited, with a combined market value of $2.68 billion as of Sept. 30. David Slager, 36, who manages the Atticus European Fund, told investors that more than 50 percent of his fund was in cash or U.S. Treasuries after he lost 43.5 percent year-to-date.
  • At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund group founded by Paul Tudor Jones, 13F holdings fell to $453 million from $5.7 billion. Jones said markets face more selling from managers.
  • SAC Capital Advisors LLC of Stamford, Connecticut, said its holdings were $7.7 billion as of Sept. 30, down from $14.4 billion at June 30. Founder Steven Cohen, 52, had about half the firm's assets in cash in mid-October, after his main fund fell 5 percent through September.
  • Louis Bacon's Moore Capital Management LLC said the value of its 13F securities fell 69 percent to $1.4 billion, while at Jana Partners LLC, a firm overseen by Barry Rosenstein that makes activist investments, they fell to $2.1 billion from $5.9 billion. Both firms are based in New York.
  • Jeffrey Vinik, who once ran the Fidelity Magellan Fund, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at Sept. 30, down from $11.8 billion at June 30.

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