GameStop's resurgence amid a new Reddit-trader push has institutional investors triple-checking short exposure, SkyBridge Co-CIO says
Getty Images / Corbis News
- SkyBridge Co-Chief Investment Officer Troy Gayeski said institutional investors are doing a 'triple check' on short exposure.
- The move to sure up shorts comes amid another Reddit trader-driven rise in GameStop and other 'meme stocks.'
- Gayeski said institutional investors are avoiding crowded shorts, diversifying exposure, and looking to larger market cap firms.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Institutional investors have had "triple check" their short exposure amid a resurgence in the Reddit-trader movement, according to SkyBridge Co-Chief Investment Officer Troy Gayeski.
Gayeksi sat down with Yahoo Finance on Thursday to discuss his company's bitcoin stance, as well as the resurgence of GameStop mania.
The co-CIO said institutional investors were surprised by GameStop's meteoric run in January, and by Reddit's power to move individual stocks.
"Coming into this year, I don't think there was an investor on the planet that said the biggest risk that's going to show up in the third week of January is going to be these meteoric, Reddit-driven short squeezes," Gayeski said.
When asked about institutional investors' thoughts on GameStop, Gayeski said "everyone knew retail was becoming more dominant, everyone should know to avoid crowded shorts, but still it was a small left tail risk."
The SkyBridge executive noted that risk is no longer small and that's forced institutional investors to re-assess their portfolios.
"More important for investors to understand is the industry as a whole has really done a triple-check on what their short exposure looks like," Gayeski said.
The CIO said that institutional investors have been "more focused on how crowded a particular short is," they've attempted to "move up in market cap" when shorting firms, and they've "become more diversified."
Gayeski also said he sees institutional investors hedging against "systematic risk" and argued there's nothing wrong with using "S&P futures or ETFs" to do that.
SkyBridge expects "short squeeze risk to be lower" going forward as many hedge funds are shying away from heavily shorted stocks.
"And as we speak today, most of our contacts, even those that had tiny positions in GameStop or any of these other meme stocks on the short side have closed those out, and there's been no P and L damage," Gayeski added.
The CIO also said that there were a number of hedge funds that made money in meme stocks as the Reddit saga was "highly profitable" for some institutions.
Overall though, the SkyBridge exec said the Reddit trade has been a "negative P and L driver."