A growing number of well-known hedge funds are reporting steep losses in the first 10 days or so of October. Their short-term declines raise questions about how hedged hedge funds really are in a sharp market downturn, especially if it turns into a correction or a bear market.
The losses, reported in a document from the asset management arm of investment bank HSBC that tracks hedge fund performance, are especially pronounced among multistrategy and macro funds. These funds typically ply a variety of markets other than just equities, such as currencies, various bond markets and futures markets.
Of course, this is only a snapshot of eight to ten trading days, depending upon the fund. If the markets recover there is a good chance many of these funds will snap back as well.
Even so, the losses shine a light on the carnage suffered by even the brightest among the smart-money crowd during the market’s recent rapid retreat.
For example, Jeffrey Altman’s Owl Creek Overseas Fund, a multi-strategy fund, lost 6.90 this month through October 10 alone, putting it down nearly 11 percent for the year. Last year it was one of the top performing hedge funds, surging 49 percent in 2013. It is managed by his New York-based firm Owl Creek Asset Management.
Kenneth Tropin’s Graham Global Investment Fund II, a discretionary (versus computer-driven) fund with “enhanced volatility,” is off more than 7 percent this month through October 14, putting it down by 1.5 percent for the year. The Graham Global Investment Fund-Discretionary fund, without the enhanced volatility, lost 3.6 percent this month through October 14 and is now off by 0.5 percent for the year. The funds are managed by his Rowayton, Connecticut-based firm Graham Capital Management.
Robert Citrone’s Discovery Global Macro fund, managed by South Norwalk, Connecticut-based Discovery Capital Management, fell 7.8 percent this month through October 10, expanding its loss for the year to 17.55 percent. We earlier reported that Citrone’s Discovery Global Opportunity Fund lost 6.96 percent this month through October 10, bringing its loss for the year to 13.28 percent.
Andrew Law’s macro fund, Caxton Global Investment, is off 2.34 percent for the month through Tuesday October 14 and is now off 4.65 percent for the year-to-date. It is managed by New York-based Caxton Associates.
New York-based Fortress Investment Group’s Fortress Macro Fund is down 3.16 percent for the month through October 10. It is now off about 8 percent for the year.
These sharp losses make losses posted by Paul Tudor Jones II’s Tudor BVI fund — it is down by 2 percent this month through October 10 — appear tame. However, it did put the fund, managed by Greenwich, Connecticut-based Tudor Investment Corp., back in losing territory for the year, by a little less than 1 percent.
Meanwhile, Alexander Roeper’s AJR International Fund, which has an activist bent, lost more than 5 percent this month through October 10 and is now down 8 percent for the year. It is managed by Roeper’s New York-based firm Atlantic Investment Management.
Several funds that lost big sums in the opening two weeks of October are still up for the year. For example, York Capital Management’s York Investment Ltd. is off about 4.90 percent for the month through October 10. The loss cut its gains for the year to about 3.2 percent. The event-driven specialist’s York Credit Opportunities Unit Trust lost 3.43 percent for the month through October 10, but that fund is still solidly in the black, up 5.67 percent for the year. Perry Capital’s more eclectic Perry Partners International is down about 2.90 percent for the month through October 10 and is now up just 3.80 percent for the year.
