| Jacob Gottlieb (Bloomberg) |
Sometimes names of funds can be deceiving. The two main funds offered by Jacob Gottlieb’s Visium Asset Management are good examples.
The New York firm’s $4.1 billion Visium Balanced Fund is really a long-short equity fund focused solely on the healthcare industry.
Visium calls its $1.7 billion Global Fund a multistrategy fund. However, more than 90 percent of its assets are invested in long-short equities. And a majority of the assets are invested in the U.S. and Canada.
Whatever you call these funds, however, both have performed well since Gottlieb launched Visium in November 2005 as a spin-off of his 20-person group from Chicago-based Balyasny Asset Management, where he had spent about four years. Visium currently manages more than $7 billion and employs more than 170 people.
Visium’s Balanced Fund is up 9.75 percent this year through May, while the Global Fund is up 6 percent after each posted roughly 2 percent gains last month, give or take a few basis points.
The Balanced Fund has compounded at 15 percent since its April 2001 inception, posting gains of 7.75 percent in 2014 and 18.7 percent the previous year.
The Global Fund has compounded at 21.4 percent since its October 2007 inception and has never suffered a losing year. In fact, in 2008 it rose 4.54 percent amid the global financial crisis even though it lost money the last four months of that year. It followed that up with a whopping 113.34 percent gain in 2009.
However, this triple-digit gain did not skew the fund’s long-term performance. The fund has posted double- or triple-digit returns in four of its seven full years.
Even more remarkable, Gottlieb has posted these gains in Visium’s two main funds running a diversified portfolio that generally has a very low net-long exposure.
For example, the Balanced Fund usually has a net long position ranging between –10 percent and 10 percent. “It is an alpha-focused fund,” Gottlieb explains. “We look to make our returns on a very significantly hedged portfolio. We’re seeking alpha between our long and short books.”
This means it is very active on the short side with individual stocks. The Balanced Fund does not make macro calls.
This compares with many long-short funds that are typically 40 percent to 60 percent net long. However, given that many of those funds tilt toward technology and Internet stocks — especially funds from Tiger Management Corp. descendants — their beta is high too.
The Balanced Fund emphasizes health care stocks, with many of its employees specializing in a variety of health care subsectors.
According to the most recent regulatory filing, the firm’s three largest U.S. equity longs are all health care issues, accounting for 17 percent of the U.S. long equity portfolio: Watson Pharmaceuticals (now Actavis); Laboratory Corp. of America, which runs health care diagnostic centers; and Perrigo Co., distributor of over-the-counter and prescription drugs, nutritional products and active pharmaceutical ingredients.
The multistrategy fund is also well hedged, with a 16.4 percent net long exposure. Its long-short book is just 14 percent net long as of the end of May, according to its May monthly statistical report, obtained by Alpha.
The Balanced Fund has less exposure to quantitative, macro/credit and arbitrage strategies.
So far this year, the fund has posted a 16 percent gross gain on its longs and a 7.22 percent loss on its shorts. In the long-short book, the disparity is a 13.7 percent gain on the longs and 5.5 percent loss on the shorts.
Like the Balanced Fund, the Global Fund is well hedged. It owns ten to 20 stocks in each sector, with portfolio management teams heading up groups based on industry and region. For example, it has separate European, Asian and U.S. teams overseeing a variety of sectors, including technology, consumer, industrials and special situations.
Visium’s May analysis is a good snapshot of how the fund operates and makes money. The report said the fund had 581 individual longs and 526 individual shorts.
For example, the firm reported that the Global Fund’s 1.9 percent gain in May was driven by consumer issues, what it calls Asia generalist and industrials, while energy and metals detracted from performance.
One of its best consumer performers was Yum! Brands, the fast-food giant that has recently become a favorite of activists.
Visium noted the Asia generalist portfolio benefited on both the long and short sides.
Visium made money from its long position in DMG Mori Seiki Co., a Japanese machine-tool manufacturer and distributor. “Earlier this year the Japanese company expanded its holdings in German partner DMG Mori Seiki AG via a tender offer in an effort to position the company as global market leader in machine-tool manufacturing and centralize information that would better meet customer needs and contribute to further sales,” Visium said in its report.
The fund also made money on an undisclosed short position in a Japanese electronics company. “While the Japanese electronics industry itself suffers from chronic overcapacity, this heavily indebted company announced significant excess inventory and impairment charges, which facilitated a major sell-off in the name,” the report said.
Its energy exposure, meanwhile, “weighed on performance only slightly,” it stated, citing the volatile price of oil, weak earnings results and overall weakness in commodities. “The sector has witnessed a significant number of generalists entering the space as valuations remain high in anticipation of an oil rally.”
Gottlieb feels his approach to finding alpha has served him especially well in diverse stock market environments over the past five years for both longs and shorts.
And with the market’s increase in dispersion between good and bad performing companies this year, he feels his approach will continue to pay off.
