Hedge Funds Build Small-Cap Shorts

Apr 28 2014 | 2:27pm ET

Hedge funds don’t have a lot of faith in U.S. small-cap stocks.

Short interest in the Russell 2000 Index is at a two-year high, according to Bloomberg and Bank of America. The $2.8 billion in negative bets against the benchmark are the highest average level since 2004.

Small-cap stocks have rallied recently, leading to fears that valuations are too high. Those worries particularly surround technology stocks; hedge funds and other speculators have simultaneously boosted their Russell 2000 shorts and slashed their exposure to the tech-heavy Nasdaq 100 Index.

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