As Market Crashes, Hedge Funds Cower

As equity and commodity markets continue to alternately surge and crash, hedge funds think they’ve found the best answer: move into cash. The Post reports that two big hedge funds and both taking large cash positions:

JPMorgan Chase’s Highbridge Capital and Phil Falcone’s Harbinger Capital are among a growing number of big-name hedge funds that are hunkering down, moving into cash and reducing the use of borrowed money, or “leverage,” to inflate returns, sources said.

“Markets are irrational and the best thing to do when markets are irrational is to move into cash, increase liquidity and take down risk,” said an official at Harbinger, which manages $21 billion.

“A lot of smart hedge funds are sitting on cash right now, and that’s the position we’ve taken,” said an employee at Highbridge, the $28 billion hedge fund shop in which JPMorgan holds a big stake.

The move to cash follows the rapid crash of commodity prices as well as a feeble rally in financials and equities since late July. With the popping of the commodity bubble, there’s no sure-fire narrative out there that folks can get behind.


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