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Hedge funds scale back trading

Hedge funds have scaled back their trading and are favoring cash over pressing their convictions in big directional trades.

Bloomberg reports that it may amount to more than the usual summer lull, as the uncertainty hanging over global markets has left many a trader wary of unseen risks.

"...
Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers.

“There’s a degree of being frozen in the headlights, of not knowing what sectors to emphasize, of what securities to emphasize,” said Tim Ghriskey, chief investment officer of Solaris Asset Management LLC, a firm in Bedford Hills, New York, with $2 billion in hedge funds and conventional stock funds.

Hedge-fund managers, who oversee $1.67 trillion in assets, are reluctant to put money to work as they are buffeted by a wide range of often conflicting political and economic forces, from fiscal policy in Europe and the U.S., to what regulations will be imposed on the financial-services and energy industries, to the growth prospects in China. In turn, smaller and fewer trades may make it harder for funds to rebound from losses incurred since May, when the industry suffered its worst decline in 18 months..."

More on the worries over economic slowdown at the link above, plus comments on the recent paring back of long stock trades by Barton Biggs versus John Paulson's convictions about a US economic recovery and his firm's large positions in US financial shares, gold mining shares, and gold.

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