Hedge funds with roots to Steven Cohen’s SAC Capital are struggling to perform in long-short equity.
Although in 2017 the stock market and hedge funds had their best year since 2013, at least two of the so-called SAC PAC firms have shut down, while many others have had trouble distinguishing themselves in the highly competitive area of long-short equity.
For example, Kingdom Ridge Capital, a small hedge fund co-founded in 2007 by Christopher Zepf, closed very quietly at the end of last year after 10 years of operation. Also last year, Neil Chriss shut down his multi-strategy firm, Hutchin Hill Capital, after suffering three disappointing years.
There was no apparent official announcement of the closure of Kingdom Ridge, which had managed less than $200 million a year ago. Its headquarters phone is now disconnected. The firm liquidated its U.S. stock portfolio at the end of 2017 and it has not filed an updated Form ADV with the Securities and Exchange Commission.
As recently as 2015, the long-short technology specialist, which ran a concentrated portfolio, was on a roll, gaining 46 percent for the year. In 2016 it was up a little less than 3 percent but in 2017 it was down nearly 30 percent at the end of July, before it stopped reporting its results to a private database. Meanwhile, many other funds are struggling, posting small gains or losses for the past year or two.
For example, Jason Karp’s Tourbillon Capital Partners is down 1.4 percent this year through May, after losing 13.8 percent last year and 9 percent in 2016.
In December, partner Kartik Joshi left the firm. He headed up the technology, media and telecommunications sectors. And last week, Amy Zipper, president and chief operating officer, left the firm, a development first reported by Business Insider. Tourbillon declined to comment.
Several other funds are muddling along, posting low, single-digit gains through May.
For example, Aurmedis Global Investors, the hedge fund headed by Anthony Chiasson, the one-time co-founder of Level Global Investors and former SAC Capital Advisors portfolio manager, is up just about 40 basis points this year after losing 1.4 percent in May, according to the firm’s communication to investors. It gained just 4.9 percent in 2017, way underperforming the market indexes.
As of January 1, the firm was managing just $56 million in regulatory assets, according to a regulatory filing, underscoring its difficulty attracting investor support.
Chiasson is trying to emulate the market neutral strategy he successfully deployed at Level Global. His net exposure has averaged between 10 percent and 15 percent.
However, the current environment has made it hard to compete with the long-short hedge funds that loaded up on the so-called FANG stocks.
Many of the tech-driven Tiger Cubs that have been posting very strong gains this year, and in 2017, have a net long exposure of 50 percent to 60 percent, and even higher in some cases. According to people familiar with Aurmedis, the firm has been especially hurt on the short side. The firm declined to comment.
Dorsal Capital Management, whose flagship long-short equity fund concentrates on technology, media and consumer companies, is up about 3 percent this year through May. It posted just a 2.9 percent gain last year, when the S&P 500 was up nearly 21 percent.
The firm was founded by former SAC technology experts Ryan Frick and Oliver Evans. It is also one of the largest among the SAC PAC, with roughly $4 billion under management at the end of last year. Dorsal did not respond to a request to comment.
The Electron Global Fund, meanwhile, was up 2.7 percent for the year through May 28, with most of the gains coming in May. It was up 15 percent last year after losing 3.2 percent in 2016. The fund, which specializes in global utilities and infrastructure stocks, is managed by James (Jos) Shaver, previously a portfolio manager at SAC for four years.
The firm did not respond to a request to comment.