JPMorgan Chase & Co., Pacific Investment Management Co. and smaller firms are inundated with money from individuals attempting to mimic the performance of hedge funds on speculation that the stock market rally is over.
So-called bear-market and long-short mutual funds, designed to protect against falling stock prices, attracted a record $10 billion this year through October, more than double the previous high in 2006, according to Morningstar Inc. Asset managers have opened 19 long-short funds, the most in one year.
The funds' rising popularity shows that small investors remain skeptical even after the Standard & Poor's 500 index recouped almost half the 57% loss incurred from October 2007 to the March 2009 low. Conventional mutual funds that only buy U.S. stocks posted $4.6 billion of redemptions in the first 10 months of the year, while bond funds added $280 billion.
The best seller among the funds is Hussman Strategic Growth, which is run by John Hussman, an economist in Ellicott City, Md. It drew $1.7 billion through September after limiting its loss last year to 9%, according to Morningstar, less than half the average of hedge funds.