Thursday, February 26, 2009

Hedge Funds Pulling Most of Their Money Out of Market at the End of Each Day

In October, the Washington Post wrote:

The largest swings have often occurred during the last hour of trading, prompting a closer look by the Financial Industry Regulatory Authority, a nongovernmental regulator of securities firms. The end of the trading day is when institutional investors, including hedge funds and mutual funds, rush to meet client demands to pull cash out of the market, analysts said.

Today, trader Tyler Durden wrote about a tip he received from a trusted source: the average equity hedge fund is 70% in cash at the end of each trading day. Durden comments:

Explains why the market performs like a schizophrenic day trader, as investors try to game the greater fool in unison, running the market up and down especially in market leading sectors such as financials. As long as a fund is not the last man in, the first 50% in any wave are set to make profits. While this has long been the modus operandi for ... notable algo trading outfits ..., the fact that it is spreading to most hedgies is shocking ....

Durden told me by email that "most portfolio managers are well aware of ths fact, and the ETF explosion especially in 2x and 3x level is all a direct function."

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3 comments:

  1. diykozmonotFebruary 26, 2009 at 3:31 PM

    LOL< seriously, Tyler Durden??? Some Project Mayhem action would be really fulfilling right about now.

    ReplyDelete
  2. maximusFebruary 26, 2009 at 5:46 PM

    GW BLOG

    Continued excellent work --- I check in often.

    Julius Caesar stopped by my blog again--so far so good -- maybe a visit from George Washington will be coming soon?

    Hope you and your readers are doing well.

    Maximus
    http://4best4worst.wordpress.com/

    ReplyDelete
  3. Greg BaconFebruary 27, 2009 at 12:53 AM

    You pathetic, sniveling whiners!

    We're Wall Street and if we want to loot ALL of your pension funds and ALL of your 401K accounts, we will.

    After all, who's going to stop us?

    Congress? Shit, get real.

    Now bend over, Wall Street has some more points it wants to RAM home and NO, we won't be using any KY Jelly, losers.

    Be thankful you still have those gold fillings in your teeth left... for now.

    ReplyDelete

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