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Hedge funds wary of ‘Reddit’ risk

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Hedge funds and other institutional investors are monitoring activity by groups of retail investors on social media-style platforms such as Reddit, according to a report in Financial News (FN).

FN quotes Patrick Ghali, Managing Partner at hedge fund consultancy Sussex Partners as saying: “The sudden increase in concerted efforts by a large group of retail investors – driven purely by sentiment and fuelled by online groups – is a new risk that fund managers need to consider and adapt to.

It’s a year since several hedge fund short-sellers got burned by armchair traders buying stock in US video game retailer GameStop and pushing the share price up 220 per cent since the beginning of last year.

“Unless regulations change, this risk is unlikely to go away completely anytime soon,” says Ghali.

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