As some of the largest, most high profile hedge fund managers calculate their performance for September, one theme is clearly emerging—most of them lagged the market’s strong move for the month. However, this is just fine with investors. In what has been a zig-zag year, managers who have — yes, hedged — and not doubled-down on one directional bet, are quietly enjoying respectable years at the three-quarter point. In fact, the trend followers are the ones who are struggling, eking out slight gains or losing money altogether.
Remember, over the past three months, the market was strong in July, horrible in August and spectacular strong in September, setting more than a 70-year record for monthly returns. So, in this environment, several managers have been able to deftly navigate without suffering big drawdowns. Take SAC Capital’s Stevie Cohen. Sources say he was up 3 percent in September, putting him up more than 9 percent for the year. Cohen’s net exposure is said to be very low, set up to extract alpha. This has been a winning strategy this year. Keep in mind that he was also up 1 percent in August when the overall market was down about 5 percent. “He has had good positive returns with low correlation,” says a satisfied investor. He adds there are plenty of long-short equity managers who are at least 80 percent net long. But, he says he prefers those who keep their exposure close to neutral.
Citadel’s Ken Griffin has fared a little worse. He was up a little over 3 percent in September and is now up a little more than 5 percent, say sources. Meanwhile, Seth Klarman’s Baupost Group, who historically has found value in many different places, is up between 6 percent and 7 percent in a number of his partnerships so far this year. Keep in mind that these returns could be somewhat understated since some of the partnerships have illiquid investments that are still held in the portfolio at cost. Klarman’s newest institutional partnership, launched in 2008, is up about 8.5 percent. This portfolio has more distressed securities than some of the others, say sources.
Lone Pine Capital’s Stephen Mandel was up around 5 percent in September and around 10 percent for the year in his long-short equity fund. His emerging markets fund is up closer to 16 percent. The stock picking specialist is known for mining huge gains in non-U.S. markets as well.
David Einhorn’s Greenlight Capital Qualified, LP was up 2.7 percent in September and 6.1 percent for the year so far. Meanwhile, Och-Ziff’s Dan Och, whose multi-strategy fund is best known for its slow and steady and unspectacular gains, generated a 1.3 percent return in his Master fund in September. As a result, he is now up 4.18 percent for the year to date. His European fund is up 5 percent for the year while his Asia fund is up 5.25 percent. Some funds had modest September performances but built on already strong years. Polygon European Equity Opportunities, an event-driven fund, was up 2.9 percent in September, giving it an 81.28 percent return for the year-to-date.
