Prominent hedge fund manager Marc Lasry has doubled his cash holding from its normal level because of concern about the fiscal cliff.

The Avenue Capital Group founder has allocated 25 percent of his portfolio to cash, Fortune reports. He believes uncertainty about the fiscal cliff will soon make investors freak out.

"There is going to be a lot of nervousness, and the markets will go down," Lasry says. When they do, he says he will be a buyer.

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That’s because Lasry’s bullish about the economy for next year, expecting growth to reach as high as 3 percent, compared with the consensus forecast of about 2 percent.

When it comes to hedge funds, Lasry is concerned about the pressure they face to produce outsized returns, as the only way to do that is through huge leverage, he says. And that could mean more financial catastrophes.

It’s been a rough go for hedge funds this year. The Morningstar MSCI Composite Hedge Fund Index rose 4 percent through October, lagging far behind the 12 percent gain registered by the Standard & Poor’s 500 Index.

Some experts question whether hedge funds are worth their hefty expense.

“Many hedge funds turned into mutual funds — but with higher fees and worse performance — this year,” Mike Murphy, who runs hedge fund Rosecliff Capital, tells CNBC.

Editor's Note: The Final Turning Predicted for America. See Proof.