Marc Lasry, who was one of the few vocal Wall Street supporters of the president during the election, has 25% of his portfolio in cash. That’s nearly double what Lasry normally has going into the end of the year. The reason is the fiscal cliff. Lasry thinks investors, who have mostly brushed off fiscal cliff fears, will soon panic about the massive mix of tax increase and government spending cuts that are set to begin January 1st.

“There is going to be a lot of nervousness and the markets will go down,” says Lasry, who is the founder of Avenue Capital Group and has been rumored to be under consideration by Obama for an ambassadorship to either Great Britain or France.

Perhaps unsurprisingly for a hedge fund, Lasry sees all this as a trading opportunity. When the market does take its fiscal cliff dive, Lasry thinks it will be a major buying opportunity.

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Lasry is actually a bit more optimistic about the economy than most, despite his concern about what the cliff could do to stocks. He says GDP will grow as much as 3% next year. The consensus estimate is for around 2%.

One thing he is concerned about is hedge funds. He says managers like himself are under an enormous amount of pressure to produce returns. “The risk free rate is 0.25%,” says Lasry. “And yet my pension fund clients still come to me and say I need 8%. No one has moved the bogey.”

The only way to produce those returns, Lasry says, would be to take on massive amounts of leverage, similar to what Bear Stearns and Lehman Brothers had going into the financial crisis. The result could be more blow-ups. “They wouldn’t accept that at a bank,” says Lasry.

Lasry’s own fund seems to be making the “bogey” this year, after a rough 2011. Avenue Capital has $13 billion in assets, and specializes in distressed debt. According to Reuters, Lasry’s main fund was up 12% through the end of September. Lasry says it’s a difficult time to invest, but the one place he has been able to get good returns is in Europe. Lasry has been buying up loans and other assets that European banks have been forced to sell in order to reduce risk. “There’s trillions of dollars of paper that is available, and we can get loans for as little as 50 cents on the dollar,” says Lasry.

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Lasry recently told Reuters that he was shocked how many hedge fund managers who had been life-long Democrats threw their support behind Mitt Romney. Lasry didn’t follow the pack. He is a regular visitor to the White House, and reportedly on Monday met with Obama, along with a number of other top Wall Street executives, to talk about the fiscal cliff.  “Everyone in that room knows taxes have to go up,” Lasry told Bloomberg Television after the meeting. “Republicans are being a little unreasonable.”