Top Hedgies Scaling Back on Stock Exposure

Date: Tuesday, March 15, 2011
Author: Lee Brodie, CNBC

Hedge funds are sometimes called the smart money due to their investing prowess and according to top hedge fund manager Anthony Scramucci the smart money is turning away from stocks, at least on a relative basis.

Scaramucci, also known as The Hedge on CNBC's Fast Money, tells us that he’s seeing broad scale de-risking. In fact he says the smart money is taking their exposure to equities down to 30% from 60% in some cases.

And he says all the uncertainty introduced by the tragic events in Japan is a key factor influencing their decision. But it's not the only factor. There are two others.

Another is the sharp increase in the price of oil [CLCV1  97.91    -3.28  (-3.24%)]. “A 10-dollar increase per barrel in oil is something like a 3/10 of a percent move lower in GDP,” he says.

Also Scaramucci says the smart money is worried about a slowdown in Europe. Faced with the specter of inflation the ECB appears likely to raise rates, he says. And he doesn't think the fragile nature of the recovery will hold much sway. "Historically they've had terrible timing with rate hikes."

For these three reasons, Scaramucci says risk assets are growing less attractive to hedge funds.

But just because other hedge funds are taking off risk, doesn’t mean that Scaramnucci shares their caution. “My personal bias is that there’s still room to go in the equity markets.”

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