Tags: hedge | fund | bearish | stocks

Some Hedge Fund Managers Remain Bearish on Stocks

Monday, 11 Mar 2013 08:01 AM

By Dan Weil

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The rise of the Dow Jones Industrial Average to record highs last week isn’t enough to turn all bears into bulls.

Some hedge fund managers remain negative on stocks, saying the surge is merely the result of massive Federal Reserve easing and investors’ search for return in a low-interest rate environment, The Wall Street Journal reports.

“The rally is built on unprecedented government intervention,” James Litinsky, who runs the $1.3 billion hedge fund JHL Capital Group, tells the paper.

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‘Financial War’ Could Wipe Out 50% of Your Wealth’

“The economy is fine right now, but there could be a trigger moment,” such as a reversal of the Fed’s quantitative easing that sends both stocks and bonds prices plummeting, he explains.

Hedge funds haven’t exactly shown themselves to be geniuses on stocks over the past year, with the average stock hedge fund rising 4.5 percent, well behind the 11.4 percent increase for the Standard & Poor’s 500 Index, according to HFR.

“The equity market is very detached from potential risks stemming from credit markets,” says Achur Iskounen, who runs hedge-fund firm Iskounen & Co.

Samer Nsouli, chief investment officer at Lyford Group International hedge fund, remains undeterred.

“Unfortunately, I am bearish and I have been wrong,” he tells The Journal. But, “make no mistake, it [the bull market] will end in tears. The eternal question is when.”

Some experts think the stock doubters will be proven wrong.

“We’ve called this whole market the bunker bull market, meaning people are still in the bunker and not really believing it quite yet,” Brian Belski, chief investment strategist at BMO Capital Markets, tells Bloomberg.

“When people find out and realize they’re losing money for several months in a row and they see the positive returns in stocks, they’ll come back.”

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

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