Tudor, SAC Capital Raised Cash as Markets Tumbled (Update1)
2008-10-14 16:49:48.10 GMT
(Updates to add SAC’s cash level in second paragraph).
By Katherine Burton
Oct. 14 (Bloomberg) — Hedge fund managers Paul Tudor Jones
and Steven Cohen sold assets to raise cash this month as credit
markets seized up and stock prices dropped.
Jones, who has been running Tudor Investment Corp.’s
biggest fund for 22 years, made his move after watching the
Mexican peso tumble 16 percent since the start of October, said
two people with knowledge of the decisions by the Greenwich,
Connecticut-based firm. Tudor manages $18 billion. Cohen, who
oversees $16 billion at his SAC Capital Advisors LLC in
Stamford, Connecticut, ordered traders to sell amid the worst
equity rout since the 1930s, a person familiar with the firm
said. The firm now holds about 50 percent of assets in cash.
The Standard & Poor’s 500 Index of the biggest U.S. stocks
tumbled 23 percent this month before yesterday’s rally, while
oil fell $23 a barrel to $77 and the Australian dollar dropped
almost 20 percent against the U.S. dollar. While hedge funds
sold in part to meet investor redemptions, some managers decided
to get out because trading had become irrational.
“For sheer condensed intensity of craziness, the last
couple of weeks beat anything I have seen,” Barton Biggs, 75,
said in a Bloomberg Television interview last week. Biggs, a
former Morgan Stanley strategist, now runs New York-based hedge
fund Traxis Partners LLC.
John Paulson, whose Paulson Advantage Plus Fund climbed
about 25 percent this year through September, was about 70
percent in cash at the end of last month, according to
“I see this as prudent risk control,” said Larry
Chiarello, director of research at Red Bank, New Jersey-based
Riverview Alternative Advisors LLC, which farms out money to
When managers do redeploy their cash, they won’t expect to
spark a market rally, Chiarello said. Instead, they’ll look for
opportunities in asset categories such as leveraged loans that
are selling at distressed levels, he said. The loans are now
trading at 71.1 cents on the dollar, according to Standard &
Poor’s LCD, a decline of 17.3 cents from Sept. 9.
Neither Jones, 54, nor Cohen, 52, have lost as much as
other hedge funds, which fell an average of 9.4 percent in the
first nine months of the year, according to Chicago-based Hedge
Fund Research Inc. Tudor’s BVI Global Fund dropped 3.7 percent
through September, while Cohen’s flagship fund declined about 5
Waiting to Buy
The people familiar with the firms asked not to be
identified because the funds are private. Jones and Cohen
declined to comment, while Paulson couldn’t be reached.
While some managers may have jumped back into markets late
last week or yesterday — when the S&P 500 rose 11.6 percent,
the biggest rally since 1939 — others may still be waiting to
In an Oct. 1 letter to investors, David Slager, 36, who
manages the Atticus European Fund, told investors that more than
50 percent of his fund was in cash or U.S. Treasuries after he
lost 43.5 percent so far this year.
“I believe it is prudent to maintain our critical focus on
capital preservation and liquidity,” he wrote. “If we see a
climactic sell-off in the market or a stabilization of credit
conditions and growth prospects, then I will be inclined to
raise our risk appetite once more.”
Roger Guy and Guillaume Rambourg, who run AlphaGen Capella
Fund Ltd. in London, put almost 80 percent of their $2.8 billion
fund in cash. The fund declined 5 percent this year as of Sept.
“It’s safe to assume that we are at least a few quarters
away from the stabilization we seek,” they wrote in a report on
September returns to investors. Until then, “the best strategy
is to adopt a bunker strategy.”
For Related News:
Top hedge-fund stories: TNI WWTOP HEDGE
Hedge funds and the stock market TNI USS HEDGE
–Editors: Larry Edelman, Matthew Keenan