Some Popular Hedge Fund Managers Are Going Cash

Market uncertainty is causing some hedge fund managers to stay on the sidelines (see WSJ article). Steven Cohen, John Paulson, and Israel Englander have move much of their funds into cash. In addition to general market uncertainty, many hedge funds are also worried about stricter regulatory requirements and short selling limits, the rules of which appear to be changing nearly every day. While it is not unusual for managers to not trade when they feel they do not currently understand the market, it is also not unusual for them to begin trading quickly once conditions improve and market dynamics are more clear. Unfortunately, even once the markets start to enter steadier waters, navigating the regulatory environment will no doubt continue to be a challenge going forward as the debate continues in earnest on how to prevent similar problems in the future. Funds may find that hedging such risk is just as important as guarding oneself against market risk.