This is interesting:
Some hedge-fund titans have yanked most of their money out of the stock market, a bearish sign amid Monday’s euphoria and an indication of how the hedge-fund business is changing amid chaos.
In recent days, Steven Cohen, the hedge-fund manager who runs the $14 billion SAC Capital Advisors, moved about half his funds, or about $7 billion, into money-market and other short-term securities, eliminating much of his fund’s exposure to the stock market, says a person close to the fund. Mr. Cohen plans on sitting on the sidelines for the rest of the year — trading a small portfolio himself but keeping shuttered most of the stock portfolios of his other managers.
Israel Englander, who runs the $14 billion Millennium Partners fund, has shifted about $6 billion from the stock market into cash, a person close to the fund says.
Meanwhile, John Paulson, manager of $35 billion Paulson & Co. — who made a spectacularly successful bet against the housing market last year — has much of his fund in cash equivalents.
The retrenchment by Wall Street’s “smart money” crowd is part of a larger effort by hedge funds that have put a total of as much as $400 billion into cash equivalents recently, according to David Kostin, an analyst at Goldman Sachs Group Inc.
Of course, much of the smart money has been wrong in the credit crisis. Many hedge funds have lost big money in the past year. That said, Messrs. Paulson, Cohen and Englander have fared better than most: Mr. Paulson’s main fund is up about 20% this year; Mr. Englander’s main fund is down 0.5%; and Mr. Cohen’s main fund is down more than 9% through September. This compares with a 29% loss in the Dow Jones Industrial Average, year to date.
I did some selling on Tuesday last week (and unfortunately a little on Friday) and I feel a little better about that move after reading this. These are not dumb investors and if they felt compelled to get to cash then no one should feel bad about doing the same thing. Of course, these guys are short term oriented so they could have been buying today, but I find it interesting that Cohen is basicallysitting out the rest of the year. Despite today’s rally, I think that will prove to be a good decision.