Hedge funds face autumn uncertainty

Big fund investors are more cautious than usual over uncertainty over the upcoming fall presidential election and the European financial crisis.

This fall expect fear and loathing on Wall Street. Swashbuckling investors, like hedge funds, usually love to take big investment risks. But now they're looking timid.

"A lot of our subscribers are large hedge funds and they're being very conservative," said Daryl Jones, the head of research for Hedgeye Risk Management. "A lot of cash on the sidelines and/or investing in assets like gold that they think are stable."

Many of the big guys are facing the same challenges as mom and pop investors: They’re afraid to mess up. David Simon is the CEO of Twin Capital Management, a hedge fund.

"A lot of hedge funds don’t want to lose whatever little they're up," Simon said.

Losing money is a very real risk this fall, with the uncertainty of the presidential election and the European crisis. But predictions often fail, says David Merkel. He runs Aleph Investments.

"To the extent that you try to play the prediction game, you run the risk that you will underperform your competitors," Merkel said.

Another reason big investors are holding back: they're hoping for more stimulus from the Federal Reserve.


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Jeremy Hobson: There will be a lot of economic news later this week, both in Europe and the U.S. A meeting of the European Central Bank; The August Jobs report from the Labor Department. But as our New York Bureau Chief Heidi Moore reports, many Wall Street traders are waiting and watching rather than buying and selling.


Heidi Moore: This fall expect fear and loathing on Wall Street. Swashbuckling investors, like hedge funds, usually love to take big investment risks. But now they’re looking timid. Daryl Jones is the head of research for Hedgeye Risk Management.

Daryl Jones: A lot of our subscribers are large hedge funds and they’re being very conservative. A lot of cash on the sidelines and/or investing in assets like gold that they think are stable.

Many of the big guys are facing the same challenges as mom and pop investors: They’re afraid to mess up. David Simon is the CEO of Twin Capital Management, a hedge fund.

David Simon: A lot of hedge funds don’t want to lose whatever little they’re up.

Losing money is a very real risk this fall, with the uncertainty of the presidential election and the European crisis.

But predictions often fail, says David Merkel. He runs Aleph Investments.

David Merkel: To the extent that you try to play the prediction game, you run the risk that you will underperform your competitors.

Another reason big investors are holding back: they’re hoping for more stimulus from the Federal Reserve.

In New York, I'm Heidi Moore for Marketplace.


Are you playing the market right now or are you sitting on the sidelines? Post a comment below or tell us on our Facebook wall.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.

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