Hedge funds, in defensive mode, stockpile cash

September 01, 2011   Anastasia Donde


"Now is not the time to do a hero trade, even if that means losing the first 1% to 2% of gains."

Hedge funds have been aggressively moving into ... cash. A number of the largest U.S. firms are holding cash balances or have markedly decreased leverage in response to uncertainty about the direction of markets—which may have helped them during the extreme volatility in August.

Regiment Capital Management in Boston had 60% in cash in July, according to investors, and Balestra Capital had built up as much as 65% in cash around the same time. Meanwhile, King Street Capital Management, which started 2011 with roughly 60% of its $19.5 billion in cash, is slowly reducing its stockpile.

“People are losing money, so managers...

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