In particular, equity hedge funds have been building up cash reserves. Merrill Lynch’s March fund manager survey revealed the highest cash positions relative to margin debt since 2003. Survey respondents were less aggressively overweight in April, but still overweight.
In part, the build-up of cash is attributed to deleveraging by several funds. For certain strategies, cash is being built up ready to deploy when new opportunities in distressed assets arise. Some managers are simply liquidating positions while they wait for the markets to become less volatile.
Where this cash...
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