After a rough end to 2014, hedge funds are entering the new year with a little more caution.
The Wall Street Journal reported Monday that hedge fund leverage has fallen to a two-year low, according to a confidential client memo from Morgan Stanley. Many hedge fund managers are taking a more bearish stance on stocks, decreasing exposure and betting against the market.
Surveys cited by the WSJ showed that 26 per cent of hedge fund managers predict the stock market to stay flat or go down by the end of 2015, while banks predicted an average 8.2 per cent rise.
Hedge funds have been falling short of S&P 500 performance for several years, returning only 2 per cent in 2014. Poor performance has led to investors pulling their money and the closing of hundreds of funds last year. Among those cutting exposure, the WSJ listed Michael Hintze’s CQS LLP, Kyle Bass’ Hayman Capital and Passport Capital LLC.
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