So much for Discovery Capital Management’s big recovery.
The firm’s Discovery Global Macro Fund posted a 3.6 percent loss in June, bringing it down 1.88 percent for the year, according to a person with knowledge of the firm’s performance. The macro hedge fund firm’s Discovery Global Opportunities lost 3.44 percent last month and is now down 5.48 percent for the year.
Remember, both funds had produced May returns in the low to mid teens, giving hope to investors that Discovery would finally get back on track after losing money in three of the four previous years.
Meanwhile, Discovery’s anticipated redemptions at the end of June came in less than the earlier anticipated $1.5 billion, the person said. Discovery only permits investors to take out their capital every six months.
The hedge fund firm declined to comment.
Discovery, headed by Tiger Cub Robert Citrone, started this year with $5.7 billion of assets under management, down nearly two-thirds from $15 billion at the end of 2014.
The firm made big bucks in May in part from shorting Italian bond futures. However, sometime during June the trade reversed.
In a weekly e-mail communication sent to investors last Friday, Citrone said he remains highly concerned about Italy, according to an individual who saw the e-mail. The hedge fund manager also noted that emerging markets continue to trade poorly and are weaker than he had anticipated. So, Citrone said he reduced some of his emerging markets longs and is maintaining some shorts.
One allocator theorized that Discovery and other macro investors may have lost money in June by betting on Brazil.
Discovery pursues macro and long-short equity strategies. The firm tells clients it combines a macro, top-down view with bottom-up fundamental analysis. It emphasizes equities, credit investments and currencies in both emerging and developed markets.
For the past couple of months, it has made money on long positions in oil and oil-related equities as well as a long bet on the U.S. dollar, according to the person with knowledge of the performance. We don’t know for sure how these trades were positioned in June.
At the end of the first quarter, Discovery’s U.S. equity long portfolio was valued at around $2.4 billion, excluding the reported value of its options positions, the person said. Its largest position was in social media giant Facebook while Chinese e-commerce giant Alibaba Group Holding was its third largest.
Two energy issues ranked among its top-five holdings. They were EOG Resources and Parsley Energy, according to the person.