(Bloomberg) — Short seller Russell Clark, who shuttered his hedge fund two years ago after losing out to the longest running bull market in history, is preparing a comeback.
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Clark, who famously wagered against stocks for much of the past decade and generated positive returns in most of those years, is considering a short-biased hedge fund, he said in an interview with Bloomberg News.
While most bond traders are betting the Federal Reserve will start cutting rates this year, London-based Clark said the Fed may not cut at all. Inflation will be higher than expected and neither Donald Trump nor Joe Biden are likely to favour deflationary policies, he added.
“I feel like the outlook for all sort of assets has changed,” he said. “When something has gone on for long enough, it’s hard for the people to see a different type of world.”
Read more: Hedge Fund Bear Clark Surrenders to Historic Bull Market
Short sellers, who sell borrowed stocks to buy them back at lower prices, have faced an existential crisis over the past decade amid soaring stocks and regulatory scrutiny. Clark, 49, closed his hedge fund in 2021 and at the time said it was “time to step back, have a think about where we are going, and then come back when I can see an opportunity for my skill set”.
The decision followed his RC Global Fund losing 2.6% in the first ten months of that year with assets down to about $200 million from a peak of $1.7 billion in 2015.
Before shutting down his hedge fund, Clark was one of the last short sellers left in the industry who was willing to make such bets amid a market that showed no sign of weakness as central banks continued their easy money policies. He was net short equities from 2012 until 2020 and still made money overall.
Born and raised in Canberra, Australia, Clark bought the controlling interest in Horseman Capital Management in 2019. He had joined Horseman in 2006 and started running the firm’s flagship fund in 2010 when John Horseman, a highly successful global stock fund manager in the 1990s, retired.
Since the fund’s closure, the economic backdrop has changed. Central banks have abandoned their low interest regimes and even the Bank of Japan scrapped the world’s last negative interest rate on Tuesday, ending the most aggressive monetary stimulus program in modern history.
“Given how long the bull market has lasted in US stocks, I suspect the downside would be prolonged and quite dramatic ultimately,” Clark said.
When asked for exact timing on when he plans to restart his hedge fund, Clark said he is waiting for more commitment from the central banks and governments that they won’t inject liquidity into the system to alleviate stresses.
“That could come tomorrow or it could be in a few weeks or a few months,” he said. But “I do think it’s coming.”
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