Tuesday, September 9, 2008

Hedge funds sitting on cash

Hedge funds - the daredevils of Wall Street - are backing away from risk, fearful of getting beaten up by the market's persistent turbulence.

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.


They're selling and Atticus ain't talking:

Frustrated by the market chatter about its health, battered hedge-fund firm Atticus has decided to give the market the silent treatment.

The $14 billion fund - which last week quelled rumors that it was liquidating - plans to "suspend indefinitely the reporting of mid-month performance estimates," it said in a Sept. 4 letter to investors.

"Some investors have, unfortunately, chosen to immediately deliver both performance figures and data reports to journalists," said the letter, which was signed by portfolio managers Tim Barakett and David Slager.

"Among other things, these breaches have been the direct cause of recent, false market rumors regarding the funds."

Atticus officials declined to comment, but a person close to the firm said Atticus will continue to provide end-of-the-month performance figures.

Chatter about an impending liquidation followed news that Atticus' two main hedge funds had been hit with losses of between 25 percent and 32 percent this year through August.

Big positions in Atticus are UNP, BNI, MA, NYX, and FCX.

Big positions in Harbinger capital are AKS, CLF, CPN and FCX.

Anyone think someone wasn't shooting against their positions?

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