Hedge fund managers like to stress that their methodology is so proprietary, akin to state secrets. Many talk about having this secret sauce that they obsessively assure no one gets their hands on.
For these reasons, hedge funds fear any kind of regulatory oversight, especially requirements that they disclose more than the currently bare minimum contained in a 13F filing — a quarterly disclosure of their U.S. equity-oriented holdings — 45 days after the period has ended.
The reality is a lot different. Yes, I’m sure there are firms that have a unique way of looking at markets and stocks, sifting for those hidden gems no one else knows about. However, it is also more common than most realize to see many of the same secretive managers who proudly shroud themselves in secrecy invested in the same stocks.
A good case in point is Apple, which was up nearly 2 percent on Monday when most markets fell by more than 1 percent. In fact, so far this year it has been one of the better stocks to own, climbing about 17 percent.
At least seven hedge funds that consider it a badge of honor to duck the public spotlight happen to count Apple as their number one holding, while another eight well known hedges rank the computer company as their second or third largest holding.
For example, D.E. Shaw, the sixth largest hedge fund firm founded by science genius David Shaw, increased its stake in Apple by more than one-third in the first quarter, making it the firm’s largest holding.
Three other firms that ranked among Institutional Investor’s top 100 hedgies also made Apple their largest holding: Duquesne Capital, headed by former Soros head trader Stan Druckenmiller; former Tiger cub Chris Shumway of Shumway Partners and Mark Kingdon’s Kingdon Capital Management. Other hedge funds that reported Apple as their top holding at the end of the first quarter include former Soros fund manager Robert Raiff of Raiff Parners, Jennison Associates and Kleinheinz Capital Partners.
Meanwhile, Apple ranked second in the portfolios of at least four other well known hedge funds — former Tiger cubs Lone Pine Capital, headed by Stephen Mandel Jr. and Blue Ridge Capital, led by John Griffin, as well as Jim Simons’ Renaissance Capital and Ken Griffin’s Citadel Investment Group. And four others listed Apple as their third largest holding, including Tiger cub Maverick Capital and the Papa tiger himself, Julian Robertson’s Tiger Management, now a private investor.
In other words, five individuals associated with Robertson’s old hedge fund are excited about the maker of the iPad, iPhone, iPod, and whatever else might come from Steve Jobs’ laboratory. In fact, Mandel and Griffin regularly get equally excited about a number of the same stocks. In addition to both making Apple their number two holdings, they each listed JPMorgan Chase as their top holding at the end of the first quarter.
Other hedge funds that listed JPMorgan as their top holding include Highfields Capital, founded by Jonathan S. Jacobson, most famous for running Harvard’s endowment, and Richard L. Grubman, recently made famous in the Boston media when he was arrested for throwing his keys in the face of a restaurant valet.
Funds that held JPMorgan as their largest stock position in March included Swiss fund Jabre Partners founder Philippe Jabre, who is best known for running afoul with two different European regulators when he was a star at GLG Partners, and Eric Mindich’s Eton Park, which holds the unofficial record for most amount of money raised on a new launch — $3.5 billion.
But, don’t tell anyone about any of this. These holdings are a big secret. Otherwise, someone else may find out about them.
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
