Hedge funds have reason to be cautious as the euro-zone debt crisis and the U.S. budget debate threaten global economic growth, according to Steve Shafer, chief investment officer at Covenant Global Investors.
"It's very sensible to have this low level of exposure," Shafer, who helps manage $315 million at the Oklahoma City-based hedge fund, said in a phone interview yesterday. "The problem is that the low exposure creates the potential for whipsaw, which hurt of lot of hedge funds last year. You get pounded in September and then you miss out on October."
Manufacturing Reports
The S&P 500 rose 1.6 percent to 1,277.81 last week, its second-best start of a year since 2006, as reports on manufacturing from America to China bolstered optimism about the global economy. It added 0.2 percent to 1,280.7 yesterday. Futures on the S&P 500 advanced 0.9 percent at 6:03 a.m. in New York today.
Buying of equities by hedge funds that have missed out on gains amid an improving economy and record corporate earnings may help propel stock prices this year, said Tim Hartzell of Houston-based Sequent Asset Management.
"The hedge funds are risk takers and they need to come back," Hartzell, who oversees about $350 million as chief investment officer at Sequent, said in a phone interview Jan. 6.