Knowing which hedge funds are selling and what they own might provide a viable short-term trading strategy…
Hedge funds prey on rivals
By Henny Sender, in the Financial Times. For a video of Henny Sender discussing hedge funds click here.
Excerpt: "Hedge funds are embracing trading strategies designed to profit from the unwinding of large positions by their competitors, market participants say.
The increasingly cannibalistic activity stems from the wave of redemptions hitting hedge funds.
More nimble hedge funds have sought to profit from the dynamic by taking short positions in securities known to be widely held by rivals. Goldman Sachs publishes a list of 50 “very important” hedge fund positions.
In its Wednesday update Goldman said: “Forced selling to cover redemptions and deleveraging . . . has put downward pressure on selected stocks.”
A favourite strategy of hedge fund managers during the bull market – mimicking the positions of others – has been turned on its head, Goldman said. “Buying the most concentrated stocks . . . has been a poor strategy during the current bear market.”
The announcement last month that Ospraie Management was winding down its flagship fund encouraged predatory activity.
One Hong Kong-based manager sent a note urging friends to short emerging and mining shares favoured by Ospraie.
Some hedge fund managers say they have been monitoring the positions held by Ospraie, if only to be ready if other funds with the same positions are forced to liquidate their holdings.”…
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