Hedge Funds Pare Russell 2000 Shorts As Cost Of Protection Drops
By Callie Bost
Hedge-fund managers, a group of investors who lost faith in small-cap stocks last year just before they plunged, are now shedding their bearish bets prior to first-quarter earnings.
Large speculators pared their short positions in futures tied to the Russell 2000 Index to around the lowest level since April relative to long ones, according to data from the Commodity Futures Trading Commission. The measure of smaller companies, whose constituents have an average market value of $1.1 billion, trades 0.8 percent below a record reached March 20.
Speculation smaller companies? earnings will weather a jump in the U.S. dollar better than larger counterparts are coaxing these managers to cover shorts, according to Peter Rup at Artemis Wealth Advisors LLC. In 2014, the same investors became the most bearish in two years on small caps, CFTC data show, before the Russell 2000 dropped 13 percent.
?What you?re seeing is perhaps a downward revision to the earnings for larger-cap companies versus small to mid-cap ones,? said Rup, the chief investment officer at New York-based Artemis Wealth, which invests in hedge funds. ?It only makes sense that one would rotate out of defensive stocks into growth in the small- and mid-cap area.?
The Standard & Poor?s 500 Index added 0.1 percent to 2,069.93 at 10:13 a.m. in New York, while the Russell 2000 rose 0.2 percent.
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