Jim Chanos Says It’s Hard to Raise Cash in the ‘Golden Age of Fraud’

(Bloomberg) -- From solar stocks to data centers, legendary investor Jim Chanos sees plenty of opportunities for short sellers. The problem: Bearish money managers like him are still struggling to raise capital.

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Chanos, renowned for calling Enron Corp.’s demise, restated his lament that now is “the golden age of fraud” as a relentless bull market has left many companies with bloated valuations. He points to how residential solar stocks are “burning millions of dollars per quarter,” while legacy data centers are at risk being big losers in the artificial intelligence revolution as their infrastructure may not be compatible with newer technologies.

“So many companies are playing games and trying to take advantage of investors, so we need short sellers more than ever,” Chanos said in an interview Wednesday with Bloomberg TV.

Despite an abundance of opportunities of short ideas, the lack of interest among institutional investors to put cash into a bearish strategy is one of the reason short sellers including Chanos himself have been struggling.

Late last year Chanos announced he was converting his hedge fund into a family office after almost four decades. Assets had dropped to less than $200 million from more than $6 billion in 2008.

More broadly, the universe of short selling has been shrinking with a short-bias hedge fund index from HFR whittled down to just 14 constituents from a 54 members in 2008. This comes in a gravity-defying bull market, global regulatory threats and retail traders squeezing companies like GameStop Corp. Amid all this, short interest in a typical member of the S&P 500 is hovering around the lowest levels in more than two decades, according to Goldman Sachs Group Inc.

While Chanos says its an opportune time for exposing corporate fraud, he doesn’t see the short-selling cohort attracting big pools of capital anytime soon.

“It is harder. Nobody wants to do it,” Chanos said, noting that the low-rate era and “the ongoing persistence of the bull market which is now 15 years,” are among the main reasons for the shrinking cohort of short-selling hedge funds.

--With assistance from Alix Steel and Romaine Bostick.

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