| Cadian Capital Management offices, New York (courtesy Google Maps) |
Richard Perry may be shutting down his event-driven hedge fund firm, Perry Capital, after suffering lousy performance, but at least two of his alums are enjoying very good years in 2017. We have already chronicled Christopher Hohn’s the Children’s Investment Fund (TCI), which was up 19 percent in the first half of the year.
Another hedge fund firm faring much better is Cadian Capital Management, headed by Eric Bannasch. He has posted a 28.1 percent gain through the first seven months of the year in his Cadian Fund LP fund after rising 2.1 percent in July.
This makes Cadian Capital, which manages about $1.8 billion, one of the top-performing hedge fund firms this year. It also is among the best-performing long-short technology-oriented funds without a connection to Tiger Management.
Cadian Fund LP has gained about 139 percent since its October 2007 inception during a period when the Standard & Poor’s 500 stock index rose 90 percent. However, it has slightly lagged the tech-and-internet-charged Nasdaq. It also has not put together two strong years in a row since 2010.
Cadian declined to comment.
Bannasch clearly has a strong background in technology on a variety of levels.
Before founding Cadian Capital in 2007, he spent four years with Perry, where he was a managing partner and portfolio manager of the technology, media, and telecommunications practice. In his bio, Bannasch claims the TMT portfolio grew in size by ten times, from $200 million of investments to more than $2 billion by 2007.
From 1999 to 2001, Bannasch worked at Cisco Systems, a red-hot networking company at the time, as a senior manager in the company’s corporate M&A and investments group. He ran transactions in the broadband access and video networking industries, according to his bio, and completed more than $800 million of deals. He was previously an associate at the Boston Consulting Group, specializing in technology and consumer industry strategy projects.
This year Cadian Fund has fared especially well despite running 28 percent net long at the halfway mark. Its gross exposure was 241 percent.
In the first quarter, internet and health care stocks led the way followed by hardware, telecom, and service providers. Cadian’s top performer was Jazz Pharmaceuticals, kicking in about one quarter of that period’s performance gains, according to Cadian’s first-quarter report.
Cadian Fund also did well with its short position in telecom company Frontier Communications Corp., whose stock dropped 37 percent. Heading into the second quarter, Cadian maintained a smaller short position in the stock, according to its first-quarter report. Since the end of the first quarter, the stock has further halved in price, even accounting for its 10 percent rise on Friday.
Otherwise, it is not clear which sectors or stocks performed best for Cadian in the second quarter.
However, we do know it has fared especially well on the long side. In the first half of the year, long equities were up 38.67 percent, according to Cadian’s June exposure report obtained by Alpha. Shorts were down less than 6 percent, not that bad considering the stock market’s upward direction.
Heading into the second half, media and internet, networking, telecom services, and health care accounted for virtually all of the fund’s net long exposure.
Market hedges were also a big portion of its short exposure.
Altogether, Cadian Fund’s top ten longs accounted for about 73 percent of exposure. Cadian does not identify the stocks. But it does note the largest was a midcap health care issue, accounting for nearly 12 percent of long exposure, following by a large-cap networking company.
Cadian’s top five shorts include two software companies, two media/internet companies, and a hardware company.
