After a year full of extremes, with many hedge fund firms closing while new ones launched with more money than ever, the first quarter of 2015 was a return to basics. Many of the new funds, including David Fear’s Thunderbird Partners and Solomon Kumin’s Folger Hill Asset Management, are betting on a strategy that has been a mainstay for decades but taken a drubbing in recent years: long-short equities.
Quantitative easing, low interest rates and a skyrocketing S&P 500 index made going long and short — especially short — difficult. But expectations are changing as investors face a likely U.S. rate hike later this year, while other countries are embracing QE. In this environment experts believe there will be more opportunities to use equities to take advantage of variable results among different stocks and geographies.
“In a world where investors are worried about the direction of the fixed-income markets, interest is increasing in lower-volatility equity strategies,” says Teun Johnston, co-CEO of Man GLG. “Uncorrelated equity strategies that deliver consistent performance generate a return that looks somewhat like an uncorrelated high-yielding bond.” At London-based Man GLG, former Cheyne Capital partner Moni Sternbach recently started a new European midcap long-short equity fund.
| New Funds update | ||||
| Firm | Strategy | Manager | Previous Job | AUM* |
| Aidyia | Long-short equity | Ben Goertzel | Novamente | N/A |
| Everett Capital Advisors | Equity and credit | Kelly Hampaul | Taconic Capital Advisors | N/A |
| Man GLG European Mid-Cap Equity Alternative fund | Long-short equity | Moni Sternbach | Cheyne Capital | N/A |
| Orchard View Capital Advisors | Health care equities | Eric Evans | SAC Capital Advisors | N/A |
| Thunderbird Partners | Long-short equity | David Fear | Ziff Brothers Investments | $1.5 billion |
| Greenvale Capital | Market-neutral equity | Bruce Emery | Citadel; Naya Fund | $200 million+ |
| Folger Hill Asset Management | Equities | Solomon Kumin | SAC Capital Advisors | $1 billion |
| Cedrus Park | Technology stocks | Anthony Chedid | SAC Capital Advisors | N/A |
| EVA Capital SP | Activist | Roland Thng | Dektos Investment Corp. | $5 million |
| Latimer Light Capital | Long-short equity | Scott Phillips | Lone Pine Capital | N/A |
| *Estimated initial funds raised. Current assets under management may be higher or lower. Source: Alpha research. | ||||
Nine of the 12 most high-profile announcements and launches during the first quarter were equity-focused. These include Everett Capital Advisors, a London-based equity- and credit-focused firm that Kelly Hampaul, formerly of Taconic Capital Advisors, is expected to open later this year; former SAC Capital Advisors manager Eric Evans’s New York–based Orchard View Capital Advisors, which has a health care strategy; and Thunderbird, which former Ziff Brothers Investments portfolio manager Fear launched in London this spring with $1.5 billion.
Former Citadel portfolio manager and Naya Fund founder Bruce Emery is in the process of starting a new global equity firm in London, called Greenvale Capital. His fund is expected to be about 50 percent U.S.-focused and 30 to 40 percent invested in Europe.
The current environment is still difficult for shorting, especially with such an active M&A environment, says Amir Madden, a New York–based portfolio manager on GAM’s alternative-investments solutions team. Funds don’t want to get caught shorting a company that could be bought out. But the climate has undeniably become more variable, Madden says: “That’s good for long-short managers and the strategy as a whole.”
— Kaitlin Ugolik
