So much for hedging.
A number of high profile hedge fund managers took big beatings in May, in some cases more than wiping out gains already generated for the year, as most major indexes fell around 8 percent.
It is a reminder than many hedge fund managers make aggressive, sometimes contrarian bets, sometimes use a lot of leverage. But, one thing they don’t aggressively do is hedge.
For example, superstar John Paulson’s Advantage Advantage fund fell nearly 4.9 percent in May, putting it in the red by about 1.3 percent for the year. Advantage Plus lost even more in May — 7.31 percent — and is now off 1.9 percent for the year, according to published reports. Other Paulson funds lost money in May, but are still up year-to-date, including The Paulson Recovery fund.
Otherwise, some of the biggest losers in May were at the British firms. For example, the CQS Convertible & Quantitative Strategies, a convertible arbitrage fund, lost 6.7 percent in May, bringing the year-to-date number to 1.8 percent. The fund, founded in 1999 by Australian Michael Hintze, who has been very bullish on converts since last fall, is said to have recently ramped up its exposure to Asian long positions.
A number of funds run by London-based Sloane-Robinson were down between 8 percent and 9 percent, while SR Global Fund C International was off more than 11 percent for the month, putting it down roughly 13 percent for the year. Hugh Sloane and George Robinson co-founded the little known London-based stock-picking firm in 1993. It is now the 48th largest firm, with $8.1 billion at year-end.
Moore Emerging Markets, the London-based fund run by former GLG star Greg Coffey, fell another 2 percent in May and is now down 7.5 percent for the year.
BlueTrend, the fund run by one-time hotshot manager Leda Braga of London-based BlueCrest Capital Management, lost more than 8 percent in May. Even so, the systematic trading fund, which was only up 4.27 percent last year, is still up about 1.5 percent on the year.
BlueCrest, the sixteenth largest hedge fund firm, is faring much better with its BlueCrest Capital International fund, which was only down slightly in May and is up 7.5 percent for the year. The firm was founded by Michael Platt, who was once known as the undisputed king of Deutschmark swaps and several years ago posed with a tiger in a print ad for the Chicago Mercantile Exchange/Chicago Board of Trade (now CME Group), accompanied by the quote: “A risk tamed is a reward captured.”
Another London-based firm — Lansdowne — also lost money in a few of its smaller funds in May, including Lansdowne UK Equity, which dropped 4 percent for the month. However, it is still up 1 percent for the year.
Other hedge funds — not necessarily London-based — lost some money last month, but are still up comfortably for the year. Richard Perry’s Perry Partners dropped 1.1 percent but is still up 8.6 percent for the year.
Dan Loeb’s Third Point Offshore fund was down 5.6 percent for May, but is still up more than 12 percent for the year. He was especially hurt by Dana Holding, his fifth largest holding, as well as positions in Lyondell and Barclays.
Did anyone make money in May? A number of lesser known funds. Among the most notable: Bruce Kovner, who was up 0.24 percent and is up 4.07 for the full year, and David Einhorn’s Greenlight Capital Offshore, up 0.3 percent for the month. However, Einhorn, who has gone public about his shorts on Moody’s and McGraw-Hill, parent of Standard & Poor’s, is down 1 percent for the year.
Stephen Taub , who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
