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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