BILLIONAIRE hedge fund manager Steve Cohen said a bear market is coming within two years, adding to a chorus of voices who say the US economy could falter by 2020.
"We're definitely late cycle, and so at some point we're going to enter a bear market, and it's going to happen in the next year and a half, maybe two," he said during a talk with MSD Capital's Glenn Fuhrman at the 92nd Street Y in Manhattan on Tuesday night.
"I don't think the returns over the next two years are going to be very good," Mr Cohen said. "If the market hangs in there, there's just going to be marginal returns."
The US$3.2 trillion hedge fund industry lost 3 per cent last month and is down about 1.7 per cent this year as stock pickers to macro traders sputtered, according to Hedge Fund Research Inc.
Mr Cohen, who returned to the business earlier this year after a government ban on him managing capital for clients ended, described how it was easier to make money during the early decades of his business because of the bull market in stocks and less competition in the industry.
The 62-year-old started his former firm, SAC Capital Advisors, in 1992 and it averaged returns of about 30 per cent annually. The hedge fund pleaded guilty to securities fraud in 2013 and paid a record fine as part of a US crackdown on insider trading on Wall Street.
Mr Cohen said he raised US$5 billion from outside clients when his Point72 Asset Management became a hedge fund this year, and that it was easy to gather money. He said he took only 10 to 15 meetings, including one overseas trip.
Mr Cohen rarely speaks publicly about markets.
In the wide-ranging talk with Mr Fuhrman, Mr Cohen touched on subjects including fatherhood, emerging artists and Chinese technology companies. He said the trend towards index investing isn't going to go away. "We see it on a daily basis where the liquidity in the markets is not what it used to be and that forces us to change what we do."
Mr Cohen said he's kept changing his business, even when it was doing well, to position it for the future, and that he's doing that today at Point72. The trader, who already invests his own money in startups through Point72 Ventures, said his goal is to build a "complete" venture capital operation and that he's been doing a lot of private investing in artificial intelligence, machine learning, fintech companies and cybersecurity.
He discussed how he has devoted a lot of resources towards alternative data and said quantum computing is a technology "coming down the pike" in the next few years.
Mr Cohen said he had visited China last year and met with technology companies including Tencent Holdings Ltd and JD.com Inc. He described Alibaba Group Holding Ltd as a "winner".
"You get blown away by what's going on there," he said of the world's second-largest economy, adding that the only risk for Chinese companies is a big one - the government can seize their assets at any time. BLOOMBERG