News > Financial Services

A month of pain: Latest on hedge funds returns for big 5 activists
Hedge Funds
<p>August was the month of pain.</p> <p>In August, per HFR, the average fund lost 2.2% (versus the S&amp;P 500's 6% fall) and is down 1% for the year. Some big name factivists aren't so lucky.</p> <p>Bill Ackman's Pershing Square was down 9.2% in August, putting the fund down 0.1% for the year.</p> <p>Top holding Mondelez International Inc (NASDAQ:MDLZ) (MDLZ) was down 6% for the month of August, no. 2 holding Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) (VRX) was off 10.5%, no. 3 Air Products was down 2%, no. 4 Canadian Pacific (CP) was down 10%, no. 5 Zoetis (ZTS) down 8% and no. 5 Restaurant Brands (QSR) off 11%. Collectively, eight make up the bulk of the long-only portfolio.</p> <p>David Einhorn's Greenlight Capital was down 5.3% in August and now down 13.8% for the year.</p> <p>Top holdings Apple Inc. (NASDAQ:AAPL) (AAPL) and GM (GM) were down 7% and 6.6%, respectively, in August. Everyone wants to talk about SunEdison, which was off 55% for the month, with Micron Tech and CONSOL also being down 11% and 8%, respectively, for the month. Einhorn was cutting some of his long and short bets in August, though.</p> <p>Dan Loeb's Third Point was off 5.2% last month, but still up 1.2% for the year.</p> <p>Third Point's top holding, Baxter (BAX) was off 4% in August, no. 2 holding Amgen, Inc. (NASDAQ:AMGN) (AMGN) was down 14% and no. 3 Allergan (AGN) was down 8.2%. Collectively, the three make up about 40% of the long-only portfolio.</p> <p>Barry Rosenstein's JANA Partners was down 4.3% in August and down 2.9% for the year.</p> <p>JANA's top holding, Qualcomm, Inc. (NASDAQ:QCOM) (QCOM), was down 12% in August. Other top holdings off big in August were Walgreen Company (NYSE:WAG) (WBA), down 10.4%, and ConAgra (CAG), down 5.4%.<br /> Other activists down in August were Cliff Robbins' Blue Harbour, off 2.6% for the month, and Scott Ferguson's Sachem Head Capital, down 2%.<br /> Jeff Ubben's ValueAct Capital, up 1.6% in 2Q, the standout of sorts - although it remains to be seen how he did in August. YTD through June, ValueAct is up 8%.</p> <p>Learn More about activist strategy</p> <p>By all accounts, it wasn't a prett</p>
Pimco's Total Return is not the fund it once was
Asset Management
<p>Oh how the mighty have fallen. Data disclosed on Wednesday reveals Pimco’s Total Return Fund has now sunk below the $100 billion mark to $98.5 billion - a third of its size just two years ago.</p> <p>The shriveling titan has now chalked up 28 consecutive months of outflows since April 2013 when it peaked at $293 billion.</p> <p>The departure of co-founder and "Bond King" Bill Gross - who shocked the investment world by shimmying over to rival Janus Capital last year - has not helped.</p> <p>The last time the fund was this small was in 2007 before it attracted mountains of cash from investors clamoring for the safety of bonds in the wake of the financial crisis.</p> <p>On plus side the outflow has slowed. The firm said investors yanked around $1.8 billion in assets from the fund in August, compared to $2.5 billion the previous month.</p> <p>The hemorrhaging is nowhere near as bad as it was in January when the fund had cash withdrawals of $11.6 billion. The fund has also delivered returns of 0.72% so far this year, beating 85% of its category peers, Reuters reports.<br /> Photo: Eli Christman</p>
SAC alums are killing it in 2015
Hedge Funds
<p>Their padrino’s performance may have taken a hit and most of their peers may be deep in the red, but for three SAC Capital veterans, things could not be any better.</p> <p>The New York Times reports that SAC alums Jason Karp, Aaron Cowen, and Gabriel Plotkin are all set to post a banner year for 2015 as Karp’s $2.9 billion Tourbillon Capital Partners returns over 18%, Cowen’s $2 billion Suvretta Capital Management notches up a respectable 7% to 9%, while Plotkin’s $1 billion Melvin Capital posts nearly a whopping 20%.</p> <p>This is in stark contrast to how the activists are doing; Bill Ackman’s Pershing Square is down 9.2% in August, while Barry Rosenstein’s Jana Partners slumped 4.3% in the same period.</p> <p>That might not be a good comparison though. SAC Capital – or Point72 as it’s now called – has always been renowned for its ability to trade large positions tactically, allowing them to dash in and out of positions quickly compared to activists who are typically invested in their targets for a long-ish haul.</p> <p>There’s still three months to go in the year though, so stay tuned. Who knows what the rest 2015 will bring.</p> <p>Photo: Insider Monkey</p>
Shanghai Chaos Investment loses millions on…Shanghai chaos
Asset Management
<p>Shanghai Chaos Investment, arguably one of the coolest-named asset managers currently out there, ironically got caught in Shanghai’s chaos the past few months.</p> <p>According to Reuters, two of firm’s funds posted serious losses since the Shanghai Composite’s mid-June peak. Chaos Value 1, the firm’s $17.3 million 20-year fund, lost a staggering 63% during that time frame, while Chaos Value 2, an open-ended, $440 million fund, lost a whopping 33%. Reuters does add however, that the former is still up 50% since its July 2014 launch.</p> <p>The funds apparently took a beating when commodity prices – as well as stock index futures – plummeted alongside the Chinese equity markets.</p> <p>The firm does seem upbeat on their prospects though:<br /> “Excessive panic after the market slump is a huge risk, just like excessive optimism was during the market surge," Chaos said in the letter. "We have opportunities to buy those equities that match our values at low prices.”<br /> Photo: John Koetsier</p>
Direct fund sales surge in Asia
Asset Management
<p>Banks are having a tough time. They are pilloried by the public and punished by regulators, but the biggest threat to their prosperity is technology.</p> <p>Already challenged by online payment platforms and alternative lenders, banks are having another source of reliable income eroded. They can’t count on the fees they’ve collected for years from selling mutual funds. Instead, more and more people are dodging the middleman and investing directly online.</p> <p>The shift is well-established in the UK, and now momentum is picking up in Asia, writes AsianInvestor. Banks had a 63.3% share of mutual fund sales in 2012 and 59.9% in 2013, but by the end of 2014 it had dropped to 48% in the region. Meanwhile the slice of the pie grabbed by direct sales grew from 10.9% in 2012 to 12.4% in 2013 and swelled to 16.2% last year, according to a report by Cerulli Associates, a leading research firm specializing in asset management and distribution analytics.</p> <p>“There is a global trend towards robo-advice, business-to-business platforms and, more recently, direct-to-consumer platforms,” it concluded.</p> <p>Commissions – in plain language, bribes – are paid to banks by the big asset managers to distribute their funds and give them a marketing edge over rivals. Clearly there is a conflict of interest, as a salesman is unlikely to misalign his investment advice with an easy payday.</p> <p>But, the public really aren’t mugs when given a choice. In China, Tianhong Asset Management partnered with Alibaba’s payment system Alipay to launch the Yu’E Bao money market fund in June 2014. It was the country’s first internet fund and now Tianhong has more assets under management than any of its competitors.</p> <p>Elsewhere, regulators are pressing the advantage home that technology can give them over powerful banks. The Australia Stock Exchange-led mFund Settlement Service allows investors to buy and redeem units in unlisted funds directly through a stockbroker, Fund Online Korea is an online supermarket that offers 900 products with low-management fees and it won’t be long before Hong Kong has its own platform in place.</p> <p>In the past, banks lobbied successfully for free-wheeling disintermediation in financial services and prospered mightily. It would be ironic if new technologies lead them to protect their own vested interests by lobbying for prudence.<br /> Photo: New York Playhouse</p>
96% of Chinese mutual funds were profitable in H1
Asset Management
<p>Here’s an interesting data point. According to Asia Asset Management, 2483 out of the 2593 registered mutual funds currently in China were profitable during the first half of the year.</p> <p>And not only that, the entire group apparently raked in a whopping $138 billion in revenue during the same time frame, almost $60 billion more than what the industry made in 2014.</p> <p>The three biggest winners appeared to be Shanghai-based China Universal Asset Management, which cashed in 46.7 billion yuan in earnings, the Deutsche Bank-backed Harvest Fund Management, which pulled in around 58 billion yuan in profits, while China Asset Management Co – otherwise known as China AMC – lorded above them all with an impressive 60.4 billion yuan in revenue.</p> <p>Granted, the Shanghai Composite did climb over 50% by mid-June, so even the most outright beta huggers should have came in deep in the black, but still, an impressive showing nonetheless.</p> <p>Everything kinda went downhill since that mid-June peak though, so it’d be interesting to see how the group fares during the second half. Unfortunately, Z-Ben Advisor’ Shichen Liu gave Asia Asset a pretty grim assessment:<br /> “Though [the] China Securities Regulatory Commission (CSRC) asked [the] China Securities Finance Corporation (CSF) and Central Huijin [Investment] to save the market, it [has] just simply slowed the drop of [the] stock market. However, [the] SHIBOR (Shanghai Interbank Offered Rate) (overnight)) has been increasing since July, which indicates that money market funds would have higher returns in the second half. The overall performance will still see a large decline compared to the first half [figures].”<br /> I wonder what happened to the 110 that didn’t make it, did they get caught by the sell-off? Curious what you guys have to say.<br /> Photo: Anthony Kelly</p>
UBS settles with hedge fund over 'crap' CDO case
Hedge Funds
<p>Note to salesmen; if you’re selling crappy CDOs to hedge funds, try not to refer to them as such in your company emails, no matter how “kewl” it may be.</p> <p>According to Business Insider, UBS just forked over an undisclosed amount of money to Connecticut-based Pursuit Partners over allegations that the bank sold investment-grade collaterized debt obligations to the fund without disclosing that the notes were about to be downgraded.</p> <p>Apparently, Pursuit initially wanted $100 million from UBS, but brought the figure down to $35 million back in 2009, leading the Swiss bank’s legal team to say: “UBS is confident that it will prevail on the merits of the remaining claims.”</p> <p>Unfortunately for them, the bankers also had a lot to say about the notes, especially in their emails:<br /> “'Kewl', wrote UBS trader Evan Malik to Hugh Corcoran in an August 2007 email that began with the bankers talking over company email about wine purchases. ‘Sold some more crap to Pursuit.’</p> <p>In another email, UBS employee Tim Goodell said to Jared Menzel that the securities were ‘vomit;’ this was in September 2007.”<br /> The settlement came in just hours before a potentially scathing trial was about to take place.<br /> Photo: Frits Ahlefeldt-Laurvig</p>
Einhorn’s Greenlight reports August, down badly
Hedge Funds
<p>David Einhorn's Greenlight Capital revealed that its fund was down 5.5 percent in August, bringing the year to date loss to 14 percent, according to its web site. Looking for the silver lining, the hedge fund, known for its activism and finding value in the stock market with strong recent years past performance, did slightly outperform the S&amp;P 500 stock index at least on a monthly basis, which was down 6.3 percent in August.</p> <p>Greenlight under-performing on a yearly basis<br /> The August losses come as other hedge fund strategies had performed to various levels. Daniel Loeb's Third Pointhedge fund was down -5.1 percent in August, but remains higher on the year by a slim 0.02 percent. Balyasny Asset Management, meanwhile, adjusted its strategy parameters to hedge what they saw as the logical potential for volatility and were said to be near flat in August and up from 3 to 7 percent on the year, according to people familiar with the matter. (Additional report to come.)<br />  According to the most recent HSBC Holdings plc (ADR) (NYSE:HSBC) (LON:HSBA) Hedge Weekly performance ranking, through August the Equity Diversified / USA hedge fund category was up 0.88 percent year to date. The Multi-Strategy / Global category was up 1 percent while the Equity Diversified Long / Short category, which includes John Burbank’s Passport Special Opportunities Fund, was up 7.51 percent. It should be noted that some of the funds in the HSBC report had not reported their August performance. The Newedge CTA index, an benchmark of the largest algorithmic traders which requires firms to report performance on a daily basis, looked to close out August near a 1 percent loss.<br /> Greenlight asks questions, but likely not the questions that matter<br /> The sharp, unhedged losses come as the fund’s founder, David Einhorn, sent out a survey to his nearly 700 investors, according to a report in the New York Times. It is unclear It is unclear what the questions were, but below are a few questions that would have been most interesting for institutional investors to answer:</p> <p> When you invest in a “hedge” fund, do you expect that the fund will consistently “beat the market” on a multi-year basis, or do you expect that the fund will provide noncorrelated returns to a certain degree, help hedge a portfolio against negative stock market events?<br /> If a hedge fund c</p>
DoubleLine Capital unveils new commodity fund
Asset Management
<p>Commodity prices have not been kind to its proponents lately. Glencore is in doldrums, so is Noble, while over in the U.S., Cargill has been forced to shut down one its commodity funds. A group of bond guys in L.A. however, seem to think that now’s the perfect time to launch one of their own.<br /> “DoubleLine Capital, the investment firm overseen by Jeffrey Gundlach, on Monday opened a new mutual fund to give investors exposure to commodities markets and help them diversify.”<br /> That’s right, DoubleLine Capital has just unveiled the DoubleLine Strategic Commodity fund, a fund that Reuters says will seek long-term returns through a variety of long and short positions on “commodity-related investments, including through the use of derivatives and leverage.”</p> <p>The portfolio manager appears to be Jeffrey Sherman, the long-haired wizard behind some of the firm’s derivative-based and multi-asset strategies, who had this to say regarding their new launch:<br /> “A broad mix of commodities historically has shown low correlations to stocks, bonds and cash. So commodities can diversify a portfolio invested in traditional asset classes…In addition, commodities can serve as a hedge against unexpected inflation. Finally, incremental returns potentially can be obtained by exploiting the term structure of prices of individual commodities.”<br /> As previously mentioned, now seems to be an importune time to be launching such a fund – could this be DoubleLine’s way of calling the bottom? These people are far from stupid, and there's no way they’d take the time to manage something that wouldn’t earn its keep.<br /> Photo: me and the sysop</p>