SAC Capital and the Millenium Partners Fund Moved to Large Cash Positions Over the Past Few Days, According to the WSJ

Many people figured that last week's bloodbath was helped along by many hedge funds liquidating equity positions due to redemption demands. An article out on WSJ.com tonight (link below) explains that many notable hedge fund managers, including Steven Cohen and Israel Englander of the Millenium Partners Fund, exited many of their positions due to an uncertainty over the market's short-term direction, and not because they needed to raise capital to meet investor redemptions.

The article says that Steven Cohen moved about half of his fund's total assets ($7 billion dollars) into money-markets and other short-term securities over the past "few days." Cohen, who employs dozens of "portfolio managers" that trade portions of the fund's capital, closed out many of these "portfolios" and shifted their assets to cash and short-term securities. The article explains that Cohen "plans on sitting on the sidelines" for the rest of the year, choosing to sit on the cash and cash equivalents and trade a "small" portfolio by himself. The article said that Cohen's main fund was down 9% through September. Cohen felt that his portfolio managers "weren't seeing the ball" and closed out many of their accounts.

Israel Englander, manager of the Millenium Partners Fund, apparently shifted $6 billion dollars of the fund's $14 billion in assets into cash over the past little while. John Paulson on Paulson & Co. has "much of his fund in cash equivalents" and is currently up about 20% on the year. This performance will just add to his mystique and immense wealth.

The article features a quote by David Kostin of Goldman Sachs in which he estimates that hedge funds have converted an estimated $400 billion dollars of their holdings into cash recently.

A few things struck me after reading this article:

1. If Cohen is such a legendary short-term trader, then shouldn't he be dominating in an emotion-fueled, momentum-driven market such as this one? I would think that this type of market would be fertile ground for the types of trading strategies that he employs.

2. How long will it be until the $400 billion in cash re-enters the market? Hedge fund managers in general are not going to sit on mountains of cash for very long - they want their hefty performance fees and they are not going to get it by sitting in cash and cash equivalents.

3. How many hedge fund managers jumped back in on Monday after the big gap-up?

Source: Smart Money Stays on the Sides

Filed under: Hedge Fund News | The Economic Meltdown | General Market News