Hedge Funds Sit on Cash In Unsure Times
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Stock hedge funds, unsure about which direction the markets would move, sat on a record amount of cash as the industry headed for its biggest quarterly decline in almost six years.
Equity managers, who oversee about one-third of the $1.9 trillion in hedge funds, held an estimated $90 billion of cash in January, a hoard that dropped to $64.8 billion the next month, according to data compiled by an analyst from Merrill Lynch & Co., Mary Ann Bartels. The last time equity funds held cash outside of their trading accounts was in 2004, according to Merrill. At that time, market direction was also unclear, with the Standard & Poor’s 500 Index up less than 2% through October.
“The data indicates to us the equity hedge funds have de-leveraged and have record cash balances,” she wrote in a report last week. “Margin debt has declined sharply in recent months as investors have grown more cautious on the U.S. equity market.”
