No Millennium, Bridgewater And Citadel Are NOT About To Blow Up

I saw this bombastic post the other day – my first instinct was that it was false – it just seems odd and too sensational to be factually correct. However, I did confirm earlier this week Bridgewater is, in fact, down over 21% (in 18% vol fund, and all its significant funds is down double digits!) in recent weeks. I thought to myself these are crazy times why not look more into it.  Hedge funds simply do not hedge anymore. The unrelenting bull market combined with ZIRP have driven all managers who want to survive to adopt much more long biased positioning. This is not merely an anecdote, there are less than ten hedge funds left which are net short.

Check out this crazy quote from a 2018 article of ours:

'When I joined Botti Brown in 2000, the average equity hedge fund was 20% net long. When we started RBI, the average equity hedge fund was 50% net long. Now, the average equity hedge fund is 70% net long. Prime brokers estimate there are <10 short-only funds (RBI being one of them).

That does not mean L/S or market neutrals do not have shorts, but they are far more long oriented. Indeed, some disguise how much they are hedged by adding shorts on the last day before reporting to investors. IE a market neutral hedge fund will put on a ton of shorts at the end of a quarter so their stat sheets will "demonstrate" they are hedging.

Its possible these funds are way over-leved. And if anyone is over-levered its the multi strat funds who are famous for that.


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