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Tepper: Have cut equity exposure to 60% from 100% 6 months ago

David Tepper, who made the most money of any hedge fund manager in 2013 at $3.5 billion, believes investors better approach the market with more caution now.

"I'm not saying go short, I'm just saying don't be too fricking long right now," the head of Appaloosa Management told a few thousand of his colleagues Wednesday at SkyBridge Capital's SALT 2014 conference in Las Vegas.

Among his concerns are a deflationary environment, weaker-than-expected U.S. growth and a European Central Bank (ECB) that badly needs to ease monetary policy.

The result is a market that not that long ago was fairly easy to play but which is now getting trickier.

(Tepper later told CNBC he has reduced his equity exposure to about 60 percent from 100 percent six months ago, but that he still sees value in stocks like Google and Priceline).

"Now I have a position (where) I'm long enough with exposure where I can bring it up or I can take it down," Tepper said. "I am nervous. I think it's nervous time."

Read MoreWho's ruling the hedge world? You'll never guess

He is especially concerned about the ECB, which targets inflation at a lower rate than the U.S. Federal Reserve, which is looking to keep inflation below 2.5 percent.

Recent reports have indicated that the ECB is preparing a variety of measures for its June policy meeting, including rate cuts and some targeted measures aimed at boosting lending to small- and mid-sized firms.

However, it's unlikely that the bank will approve quantitative easing measures along the lines of other central banks including the Fed, which has boosted its balance sheet past $4.3 trillion in its easing measures since the financial crisis.

David Tepper, founder of Appaloosa Management.
Adam Jeffery | CNBC
David Tepper, founder of Appaloosa Management.

"The ECB—they better ease in June," Tepper said. "I don't know how far behind the curve, but I think they're really, really far behind the curve."

Read MoreTepper made $3.5 billion in 2013

Tepper has become something of a guru in the hedge fund space. SkyBridge founder Anthony Scaramucci pointed out in his introductory remarks before bringing Tepper onstage that anyone investing $1 million in Appaloosa 20 years ago would have $149 million today.

Tepper said his priority has been to return money to shareholders rather than simply building assets.

"I think we're OK," he said of the current investing climate, "but listen, there's times to make money and there's times not to lose money. This is probably (a time when) you're supposed to think about preserving some of your money. If you're 120 percent invested, it's probably too much. You can still be long, but you probably should have some cash."

- By CNBC.com's Jeff Cox

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