Carl Icahn’s private hedge fund suffered a large loss in the second quarter.
The octogenarian’s investment portfolio was down 8.1 percent for the June three-month period and down 8.8 percent for the first half of the year, according to Icahn Enterprises’ second-quarter report. For comparison, the S&P 500 was up 4.3 percent and 15.3 percent for the second quarter and the first half, respectively, including reinvested dividends.
Icahn’s investment portfolio also lost 16.9 percent in 2023, compared with a 26.3 percent gain for the S&P 500, including reinvested dividends. That was the worst loss for the portfolio since 2016, when it dropped 20.3 percent, according to an earlier filing.
The former corporate raider is best known these days for his high-profile activist campaigns.
Icahn does not have a hedge fund that accepts outside investors. He and his affiliates own 85 percent of the depositary units of Icahn Enterprises, a publicly traded holding company with subsidiaries currently engaged in seven operating businesses. One is the investment portfolio, which is run like a hedge fund, with both a long and a short portfolio. The other businesses are energy, automotive, food packaging, real estate, home fashion, and pharmaceuticals.
Icahn and his affiliates held about $1.9 billion in the investment funds as of the end of June, accounting for 39 percent of the funds’ assets under management. Icahn Enterprises held the remaining $2.9 billion in the investments portfolio.
In July, Carl Icahn redeemed $250 million from his personal interests in the investment funds, according to the latest filing. He had also redeemed $1.5 billion of his personal capital in the funds in the first half of 2023. Additionally in July 2024, the investment funds distributed $256 million in cash to Icahn and his affiliates and $394 million to Icahn Enterprises.
The investment funds generally seek undervalued stocks that sometimes turn into activist targets. As of June 30, the most significant holdings were Nevada utility Southwest Gas Holdings, utility giant American Electric Power, Caesars Entertainment, International Flavors & Fragrances, and specialty pharma company Bausch Health, according to an Icahn Enterprises presentation.
In the second quarter of 2024, the investment portfolio’s long book was solely responsible for the loss, dropping 18.5 percent, which included the impact of derivatives, according to the quarterly filing. This was offset by a 9.1 percent gain in the short book and a 1.1 percent gain in what Icahn calls “other.” According to the filing, second-quarter losses came from the health care and energy sectors. It does not identify specific stocks.
In the second quarter, shares of CVR Energy, a majority-owned subsidiary of Icahn Enterprises, dropped 25 percent. CVR is a holding company primarily engaged in the petroleum refining and marketing businesses. Bausch Health lost more than 34 percent in the second quarter.
Looking ahead, as of the end of June, the investment funds had a net short notional exposure of 16 percent, the lowest level in some time. The funds had a net short notional exposure of 27 percent at the end of March, down from 36 percent at year-end and 41 percent at the end of September 2023, according to earlier Icahn Enterprises filings.
The long exposure as of June 30 was 83 percent, almost all of it from equities, and the short exposure was 99 percent — 85 percent from equity, 10 percent from credit, and 4 percent from commodities. The notional exposure represents the ratio of the notional exposure of the investment funds’ invested capital to the net asset value of the funds as of June 30, 2024, the filing says.
The 83 percent long exposure breaks down to 46 percent from the fair value of long positions and 37 percent mostly single-name equity forward and swap contracts. Of the 99 percent short exposure, 44 percent is attributed to the fair value of the short positions and 55 percent is made up mostly of short broad market index swap derivative contracts, short credit default swap contracts, and short commodity contracts.