| Eric Mindich, Eton Park Capital Management (Bloomberg) |
The multistrategy portfolios managed by Eric Mindich’s New York–based Eton Park Capital Management hedge fund firm returned less than 1 percent in the second quarter.
Even so, the various classes of the main portfolio of the hedge fund, Eton Park Fund, are up between 7.9 percent and 8.1 percent for the year, which excludes what the firm calls “special investments.”
The classes of funds that include these private or thinly traded investments are up between 6.5 percent and 6.6 percent for the year.
The special investments portfolio gained 0.12 percent in the second quarter but is down 1.76 percent for the first half of the year.
Asia led second-quarter gains in the fund’s main portfolio, “with significant contributions from both Japan and China,” states the letter, dated July 16 and obtained by Alpha. The fund also made money from derivatives and merger-related investments.
On the other hand, Eton Park says in its review of the quarter that U.S. equity positions “were the primary detractors,” noting it had “idiosyncratic losers on both the long and short sides.”
In its statistical analysis, Eton Park notes that it still managed to post a 0.7 percent gain in the quarter from its long-short strategy.
Over the first half of the year, Eton Park tells clients, gains were broad-based, “with positive contributions from all regions and strategies.”
Most of the fund’s first-half gains, though, came equally from two of its five strategies: equity long-short and derivatives, and market strategies.
Drilling down further, three of its five biggest winners in the second quarter came from outside the U.S.
The fund’s biggest gain came from Japan equity-related options and shares of U.S. tobacco giant Lorillard, which in June was acquired by Reynolds American.
Other top winners were Inner Mongolia Yili Industrial Group Co., the largest branded dairy company in China; Japanese bank Sumitomo Mitsui Financial Group; and CDK Global, the provider of software and services to auto dealers that was spun out from ADP last October.
On the other hand, the fund’s biggest losses in the second quarter came from a short position in an unnamed U.S. telecommunications company, NorthStar Asset Management Group, an asset management firm that specializes in managing real estate; shorts of UK homebuilders; a short position in the euro; and a short of a U.S. building products company. Like most hedge funds, Eton Park does not identify the names of specific companies it shorts.
In the second quarter Eton Park took profits with “considerable gains” from a number of positions that the hedge fund believes “have played out,” including BMW, CDK, Liberty Ventures, Spirit AeroSystems Holdings, ThermoFisher Scientific and Volkswagen.
Eton Park also tells clients it “built up” several new positions, including two of its larger holdings, Microsoft and Google. It also is playing a number of M&A deals.
“In general, we feel good about our portfolio across the globe and believe that the current opportunity set should continue to provide many fruitful areas for future investment,” the letter states.
Eton Park formally ended its special investments program in 2012. The firm is now in the process of liquidating the program’s holdings, which comprise 18 investments.
Four of these 18 positions “have been nearly fully monetized,” the firm says, but are not closed. “They are pending final settlement of certain transaction items such as receipt of payments, escrows, or indemnities,” Eton Park explains.
Ten of the 14 remaining “active” special investments holdings account for 96 percent of the portfolio’s market value.
