By Saijel Kishan
Aug. 6 (Bloomberg) — Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities.
Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News.
Tudor said the 47 percent gain in the Standard & Poor’s 500 Index of the largest U.S. companies since March 9, when it fell to a 12-year low, is a “bear-market rally.” The index topped 1,000 for the first time in nine months this week after companies reported better-than-expected profits.
“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” Tudor said. “We are not inclined to aggressively chase the market here. Many doubts remain about the sustainability of this recovery, most prominently the weakness of household income growth.”
Tudor’s biggest hedge fund, the $8.9 billion Tudor BVI, gained 10 percent this year through July after losing 4.5 percent in 2008. Hedge funds on average lost a record 19 percent last year, according to Chicago-based Hedge Fund Research Inc.
The firm said that a year-end gain in stocks may be another bear market rally with equities falling in 2010.
Steve Bruce, a spokesman for Tudor, declined to comment on the letter.
Tudor said it expects the U.S. dollar to fall by the end of the year as money managers diversify their currency reserves. The dollar advanced 0.4 percent to $1.4341 per euro after touching $1.4447 yesterday, the weakest level since Dec. 18.
“Reserve accumulation and diversification trends will be persistent and mutually reinforcing the direction of the U.S. dollar,” Tudor said.
Tudor was “intrigued” by Japan, saying that a loss in lower-house elections by the ruling Liberal Democratic Party could lead to increased investments in the country by the end of the year, according to the letter.
The firm received $1.3 billion in new investments from March to July and reinvestments of $287 million from its $2.26 billion Legacy fund, created last year to hold hard-to-sell holdings.
Tudor last month opened the first managed account linked to its Tudor Tensor futures strategy, overseen by Steve Evans. The firm won’t offer managed accounts, in which clients hold their money separately and are allowed to make withdrawals at will, linked to its flagship fund, according to the letter.
To contact the reporter on this story: Saijel Kishan in New York at email@example.com
Last Updated: August 6, 2009 18:12 EDT