Hedge Fund Chief Coffey Predicts Rally in First Bullish Call

(Bloomberg) -- Hedge fund manager Greg Coffey has made his first bullish call since starting his own money pool eight months ago, saying that a rally in riskier assets will surprise investors next year.

Tighter money supply and interest rate hikes in the U.S. could prompt asset prices to tumble in the first quarter of next year, Kirkoswald Capital Partners’ Coffey wrote in a letter to investors. That, in turn, may lead the central bank to reverse course, spurring a rally in the second quarter, according to Coffey.

“We could be walking into the second quarter with an end in quantitative tightening, a huge fiscal package in China, and a relaxation of trade tensions," he wrote. “Throw in a U.S. infrastructure package and 2019 would beat all current expectations of risk asset upside."

Coffey’s prediction comes as other money managers have raised concerns about the impact of interest rate increases on an already jittery market. Earlier this month, Jeffrey Gundlach said the Federal Reserve shouldn’t raise interest rates. In an opinion piece in the Wall Street Journal, billionaire investor Stan Druckenmiller urged the Fed to pause its “double-barreled blitz” of higher rates and tighter liquidity when economies are slowing and markets are falling.

Hedge fund managers have been whiplashed by turbulent global markets, with losses accelerating in the past two months. Coffey was no exception: His fund lost 0.7 percent in November, the biggest drop in its relatively short existence, shrinking its gain for this year to 5.4 percent.

“The only thing that was terrible about November was the lack of talent shown by investment managers universally, myself included,” Coffey wrote.

A spokesman for Coffey’s firm declined to comment.

Earlier this year, Coffey compared market turmoil to the end of the dot-com bubble in 2000 and joined a cohort of investors predicting an end to the decade-old rally in asset prices, as central banks move to normalize policies and the rise of populism threatens trade across the globe.

Coffey, who previously worked at GLG Partners and Moore Capital Management, is raising capital and told prospective investors earlier this year that he expects to double assets under management to about $1 billion by the end of 2018.

©2018 Bloomberg L.P.

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