| Christopher Hohn (Bloomberg) |
Several activist fund managers remain among the top-performing hedge fund managers this year, which helps to explain the surge in fund-raising within the strategy.
Most activists have easily outperformed the Standard & Poor’s 500 index, which was roughly flat for the first six months and is up 1.2 percent with dividends reinvested. Several activist managers posted double-digit gains in the first half of the year.
Christopher Hohn’s The Children’s Investment Fund Management (TCI) continues to lead the way. TCI’s London-based fund of the same name was up about 8 percent in the second quarter alone. As a result, TCI is up 21 percent through the end of June.
Its second-quarter performance was led by Time Warner Cable, which recently agreed to be acquired by Charter Communications. The stock returned 19.4 percent in the second quarter alone.
TCI also benefited from Aurizon, the Australian rail freight company, which gained 5.8 percent for the quarter, and Moody’s, the New York–based credit ratings company, up 4.3 percent for the quarter.
Sachem Head Capital Management, the New York hedge fund firm headed by Scott Ferguson — Pershing Square Capital Management’s first analyst — added 3.1 percent in the second quarter and is up 14.2 percent through June. It returned 22.5 percent in 2014.
The hedge fund benefited last quarter from CDK Global, a provider of technology and marketing services to auto retailers that was spun off from payroll-processing company Automatic Data Processing in late September. It was the fund’s largest position within its concentrated portfolio of eight stocks.
Five of those eight stocks are healthcare-related. One of them, specialty drug maker Mylan, surged 15 percent last quarter, while Bio-Rad Laboratories, which supplies products for the biochemical and pharmaceutical industries, was up 11 percent.
Jeffrey Ubben’s ValueAct Capital Master Fund, managed by San Francisco-based ValueAct Capital Partners, gained 1.62 percent in the second quarter and was up 8.09 percent in the first half of the year.
Long-time ValueAct holding Valeant Pharmaceuticals, still its largest position, drove the gains. Shares of the pharmaceutical giant returned about 12 percent in the second quarter alone. Shares of Microsoft, ValueAct’s second largest position, gained about 8 percent in the quarter.
Keith Meister’s New York-based Corvex Management netted a 1.6 percent return in the second quarter and 7.9 percent in the first half of the year. The fund, which is headed by Carl Icahn’s former right-hand man, got a big boost from its largest position, energy infrastructure giant Williams Companies, which surged nearly 14 percent last quarter in large part because it received an unsolicited takeover offer from Energy Transfer Equity. Yum! Brands, a position Meister disclosed in early May, gained more than 14 percent in the second quarter.
The Soroban Fund, which also counts Williams as its largest position, rose 1.3 percent in the second quarter, putting it up 7.1 percent for the first half. The fund’s manager, Soroban Capital Partners, a New York–based long-short equity firm. It is headed by Eric Mandelblatt, one of the founding partners and portfolio managers of New York-based hedge fund firm TPG-Axon Capital Management, and Gaurav Kapadia, a former TPG-Axon partner.
Other, more prominent activists did not fare as well, although they still easily beat the benchmark. For example, William Ackman’s Pershing Square Holdings, managed by Pershing Square Capital Management, lost 0.3 percent in the second quarter and was only up 3.2 percent for the first half. The New York-based firm was hurt, in part, by its high-profile negative bet on Herbalife, the controversial multi-level marketer of nutrition products, whose stock surged nearly 30 percent in the second quarter alone.
Richard (Mick) McGuire III’s Marcato International fund, managed by San Francisco-based Marcato Capital Management, was up 4.73 percent in the first half after losing 2.10 percent in June alone. McGuire is also a Pershing Square alumnus.
Nelson Peltz’s Trian Partners Ltd., managed by New York-based Trian Fund Management, returned less than 4 percent in the first half of the year after losing money in June. It is down another 1.55 percent this month through July 17.
