A notoriously bearish hedge fund manager is more convinced than ever a crash is coming - and has pushed his short bets to a record
Reuters / Kai Pfaffenbach
- Bearish fund manager Russell Clark increased Horseman Global Fund's net short position to 111% of gross assets, Bloomberg reported on Tuesday, citing an investor letter.
- Clark is betting against a historically long bull market at a time when central-bank rate cuts and tempered trade-war tensions have pushed stocks to record highs.
- Horseman is eyeing its worst yearly loss yet, with its short-heavy strategy yielding a 27% loss on a year-to-date basis, according to Bloomberg.
- The manager told investors in October he "can see all the problems with the markets," and the only issue "is timing."
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Hedge fund manager Russell Clark stands to win big from a market crash. But record-setting stocks haven't been kind to his bearish investments.
The Horseman Global Fund manager raised his portfolio's net short position to 111% of gross assets, Bloomberg reported, citing an investor letter sent Monday. Clark has been regularly shorting stocks since 2012, according to Bloomberg.
The London-based manager is actively betting against the longest bull run in history, as central-bank rate cuts and and trade-war optimism fuel new market peaks. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all closed at record highs Monday, bucking summer fears of an economic recession.
Bearish investors are now faced with two options: double down on a market contraction or exit before rising stocks further damage their positions. Clark claims the market exhibits several signs of a crash coming in the future, and that bearish investors simply need to be patient.
"I can see all the problems with the markets, and I can see how they will unwind, and how we will make money from it," the fund manager told Horseman clients in October. "The issue is timing."
Up to this point, Clark has been a few years early to the bear-market party. His fund tumbled 24% in 2016 after years of double-digit gains, according to Bloomberg. Horseman is on track for its biggest annual loss yet, having lost 27% year-to-date. The fund's assets have fallen to $263 million from $1.7 billion in 2015, Bloomberg reported.
Despite Horseman's losses and record-high stock indexes, many of the world's richest side with Clark in his economic pessimism. A majority of the world's wealthiest investors anticipate a "significant" market slump in 2020, according to a UBS Global Wealth Management survey published November 12. Of the 3,400 investors surveyed, 25% of their average assets are in cash, and roughly 60% of respondents said they'd consider increasing their cash reserves.
"Business fundamentals that once were the backbone of how investors think about the market are now being usurped by a confusing geopolitical landscape. As a result, investors are now less likely to act," UBS said in the report.
Markets could also be driven lower by the simple theory of economic cycles, Clark said in an October letter, according to Bloomberg. The record-long expansion has led many to grow concerned of upcoming contraction, and the manager's strategy could be a rare winner should a recession tear into global markets.
"The investing world at large is about to discover the pitfalls of levered long investing at the end of the cycle," Clark wrote in October. "Exciting times ahead."
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