Hedge Fund Leverage Is At Its Highest Level Since 2004, Indicating Investor Confidence In Equity Markets

Monday, January 14, 2013 08:24
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Hedge Fund Leverage Is At Its Highest Level Since 2004, Indicating Investor Confidence In Equity Markets

Tags: hedge funds | investor behavior | stocks

Leverage in hedge funds is at its highest level since 2004. Loans on the NYSE are also at their highest levels in four years.

 
Both are signs of increased confidence in the markets as investors appear willing to take more risk.

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With equity valuations and earnings 9.8% below the average of the last six decades, investors are betting the S&P 500 index will once again reach its highs of October 2007.
 
Gross leverage was 153% for the week ended January 4. The average one year ago was 123%.
 
Leverage has served investors well during the 15% rally since June 2012. Borrowing increased after the fiscal cliff deal was announced.
 
Hedge funds are also closing bearish bets on US equities that have dominated their portfolios throughout the recovery.
 
Investors who have moved money out of the equities markets over the past four years have left over $200 million on the table.

 

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