There was no shortage of high-profile hedge fund firms with double-digit losses entering the final month of the year. The struggles of a slew of New York–based firms — William Ackman’s Pershing Square Capital Management, David Einhorn’s Greenlight Capital, Leon Cooperman’s Omega Advisors and Larry Robbins’s Glenview Capital Management — have been well chronicled.
However, a handful of firms with much lower profiles are winding down the year with strong double-digit gains in some of their funds, a reminder that 2015 was not nearly as bad for everyone as the big-name managers want you to think.
A good example is London-based Lansdowne Partners, whose funds have clearly been unaffected by the firm’s management changes in recent years. As of December 11, its roughly $10 billion Lansdowne Developed Markets Fund had gained 16.52 percent, its Lansdowne European Equity Fund had returned 25 percent and its new energy fund had added 12 percent.
All of the profits in Lansdowne Developed Markets have come since the second quarter, when the fund posted a 5.3 percent gain, reversing a loss in the previous period. The fund followed up with a more than 10 percent gain in the third quarter, a period that was the ruination of many funds amid the market’s summer sell-off and overall volatility.
The fund, however, has benefited from short bets on energy and other commodities, among other plays, according to reports. It reportedly benefited from shorting Glencore, the Swiss commodities giant, whose stock is down 75 percent since April, and Fresnillo, the Mexican gold miner, whose stock is down about 30 percent from its high this year.
The fund entered the third quarter with a significant net short position in basic materials as well as in technology stocks, according to the fund’s second-quarter letter to clients. On the other hand, the fund had a very heavy bet on financials, accounting for the bulk of its net long exposure. Among its largest holdings were U.S. banking giants Goldman Sachs, JPMorgan Chase & Co. and Wells Fargo & Co. These stocks took a beating in the third quarter. (The firm declined to comment.)
Another top-performing hedge fund this year was Horseman Global Fund, a long-short equity hedge fund managed by London-based Horseman Capital Management. The fund had returned 19.5 percent through mid-December after gaining nearly 5 percent so far this month.
Sure, it surged more than 24 percent in the third quarter. But remember, this is the fund that has been net short for several years — even as it posted gains of between 12.6 percent and 19.15 percent in each of the three previous years, riding, in part, a big bet going long U.S. Treasuries.
At the end of August, Horseman, headed by Australian native Russell Clark, was 50.84 percent net short equities; it was 48.35 percent net long bonds. During that month, the fund made money on currencies and its short book.
At the end of November, Horseman increased its net short position to 66.20 percent, mostly by hiking the short exposure. This includes a short exposure of 9.1 percent to the oil transportation sector.
Even so, Clark told clients in his third-quarter letter: “I struggle to contain my bearishness. I suspect we have already entered a global recession, and investors are hoping central banks can do something to save them again.”
Yet another strong performer this year has been New York–based Two Sigma’s Two Sigma Compass Cayman Fund, which had returned about 13 percent through November. The firm, one of the top quantitative fund managers, was founded by D.E. Shaw alum John Overdeck and David Siegel in 2001. Two Sigma Compass has compounded at slightly under 16 percent since its 2005 launch, according to several hedge fund databases that track its performance. It rose 25.6 percent last year and 14 percent the previous year, suggesting its consistency through different kinds of market environments. In fact, its worst drawdown was slightly less than 10 percent.
“We combine massive amounts of data, world-class computing power and financial expertise to develop sophisticated trading models,” Two Sigma explains on its website.
