In an interview with the Wall Street Journal, Mr Cohen said that because hedge funds were tending to buy the same shares, any downturn in prices could cause a mass exit by the funds, making sharp drops even worse.
"There will be a real decline that may devastate hedge funds that have crowded into the same stocks," he said in the interview.
"Hedge funds are bigger than they used to be. Their positions are bigger. I worry that if everyone were to sell, could we get out?"
The influential investor also said that the fast-moving strategies employed by many hedge funds were forcing other investors to adopt longer-term approaches in order to differentiate themselves.