Post by stcks on Sept 20, 2016 0:33:57 GMT
Several smaller funds have coped while big name funds struggle with market reversals
By Laurence Fletcher Updated Sept. 19, 2016 1:01 p.m. ET
A trader works on the floor of the New York Stock Exchange.
Some of the biggest stars in the hedge fund industry are badly lagging smaller, lesser known rivals this year.
Many big-name funds have been hit by sharp reversals in markets, including U.S. government bonds and U.K. stocks, and have struggled to extricate themselves from positions that have gone bad.
According to data group eVestment, hedge funds below $250 million in size are up 4.1% this year on average to the end of August compared with a 1.4% gain for funds above $1 billion in size.
Among large funds to suffer this year is Brevan Howard, which is run by Switzerland-based billionaire Alan Howard and manages around $19 billion in assets. Its flagship Master fund has lost 2.5% this year to Sept. 2, said a person who had seen the numbers. A spokesman for Brevan declined to comment. The fund has lost money recently on bets on U.S. and Japanese bonds and on the yen and the euro, according to an update to investors.
Tudor Investment Corporation, with around $11 billion in assets, has seen its main global fund lose 3.6% in the first eight months of the year, according to performance numbers seen The Wall Street Journal. A spokesman for Tudor declined to comment.
Meanwhile, Lansdowne Partners, which runs around $20 billion in assets, has seen its flagship fund lose 12.8% to the end of August, according to numbers sent to investors. The fund, run by Peter Davies and Jonathon Regis, made double-digit gains in each of the past four years.
And Odey Asset Management, which runs around $9 billion in assets, has seen its European fund lose 34.9% in the first eight months of the year.
“It’s been a very tough year,” said Crispin Odey, whose fund’s bets on falling stocks were hit by rising markets. “My view was that earnings were falling apart,” he added. “What I failed to understand was that central banks were determined that this [rising asset prices] would carry on.”
However, several smaller funds have coped well with the market conditions.
Blue Diamond Asset Management AG is one of the top-performing hedge funds of 2016, having gained 16.1% to the end of August. The fund, which tries to profit from inefficiencies in stock market volatility, runs $360 million in assets and has stopped taking money from new investors.
“With the risk-on, risk-off mentality in markets, those funds that can move their portfolio around have an advantage,” said Russell Barlow, head of hedge funds at Aberdeen Asset Management PLC, which has around $10 billion in hedge fund assets.
Among macro funds, New York-based Haidar Capital Management LLC, which runs $300 million and is headed by former Credit Suisse proprietary trader Said Haidar, has gained 13.7% this year to the end of August. Mr. Haidar said smaller funds were able to profit from opportunistic market events such as distortions created by central bank money-printing.
And Quest Partners LLC, a computer-driven macro firm, has seen its main fund, which runs $365 million, gain 12.7% through August. The fund profited from bets against stocks in January, a bet on the gold price rising in February, and changing its position to bet against sterling in the wake of the U.K.’s vote to leave the European Union in June.
However, not all big funds are suffering. Michael Hintze, the Australian founder of London-based CQS LLP, has seen his $2.7 billion flagship Directional Opportunities fund gain 18.3% this year, helped by bets on rising stocks and structured credit prices.
“I do think flexibility and nimbleness have helped some players this year,” said Fred Ingham, ” head of hedge fund investments, international, at Neuberger Berman.
Write to Laurence Fletcher at laurence.fletcher@wsj.com