“At the end of the decade, they were the best place on earth to make money,” Aronstein said of emerging markets. “Things tend to reach extremes and then sow the seeds” of their own failures, he said.

Aronstein and Shaoul have had their own missteps, especially at the start. Marketfield began investing in stocks on Oct. 9, 2007, the day the S&P peaked at 1,565.15. While they correctly predicted that the housing slump would undermine financial shares, their bets that industrial companies such as General Electric Co. and International Business Machines Corp. would escape unscathed proved wrong. The S&P sunk as low as 666.79 in March 2009.

“It took a long time to turn that into more money,” Shaoul said. “One of the things we really got wrong was not radically cutting back on exposure during that two week period” after Lehman Brothers Holdings Inc.’s Sept. 15, 2008 bankruptcy.

As the fund grows bigger, it may become more difficult for Marketfield to maneuver and time the market right, said Ronald Sugameli, chief investment officer of Wellesley, Massachusetts- based Weston Financial Group Inc., whose $1.7 billion includes holdings in Marketfield.

Financial Stocks

“They probably still have some room, but at some point, they may bump up against their capacity,” Sugameli said in a phone interview May 16. “Scalability is an issue for many new managers as they become successful.”

Aronstein said the fund’s size hasn’t become a barrier because the partners focus on broad market trends, not picking small-capitalization stocks for short-term trading.

The fund bet against financial shares, including New York- based Citigroup, in 2008, helping limit losses that year to 13 percent while the S&P tumbled 37 percent.

In 2009, Marketfield gained 31 percent after buying ETFs for regional banks, retailers and homebuilders, as well as Google Inc. to ride the U.S. economic recovery from the worst financial crisis since the Great Depression.

A long-short fund like Marketfield tends to underperform the S&P 500 in a bull market, which hurts its bearish bets, according to Josh Charney, an analyst with Morningstar Inc. in Chicago.

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