Balyasny normally maintains a high gross exposure. But this is a multi-year high – and is way up from around 355 percent or so just the previous quarter and a recent low of about 300 percent at the end of June.
“Capital usage continues to trend up,” Balyasny states simply in the letter.
We previously reported that the firm’s Atlas Global fund rose 1.56 percent in the first quarter, while Atlas Enhanced rose 2.51 percent, in line with most multistrategy hedge funds. Last year Atlas Global lost 1.51 percent after posting single-digit gains the two previous years. Atlas Enhanced lost about 0.7 percent in 2016 after gaining nearly 6 percent in 2015 and 13.7 percent the previous year.
Balyasny founded the firm in December 2001. At year-end it had $12.6 billion under management.
The letter provides a rare insight into Balyasny’s positioning and which strategies have worked or hurt the funds in recent months. The firm’s structure is sort of like other high-profile multistrategy firms. It deploys many risk-taking teams with specific specialties, allocating capital across different asset classes and strategies.
“These teams all work within a well-defined risk framework that encourages true alpha generation and limited directional risk taking,” the firm explains on its website.
BAM stresses that it encourages internal transparency and collaboration among the teams. Turnover is also not unusual. In the first quarter of 2017 alone it hired eight new portfolio manager teams, half of them in macro and three in long-short equity.
Balyasny points out in the letter that portfolio manager teams hired since 2016 were responsible for 20 percent of first-quarter returns. In the first quarter, long holdings drove 75 percent of alpha generation within the Atlas strategy.
Looking at sectors, Balyasny says it enjoyed good performance across most industries, led by consumer, energy, industrials, TMT, and financials. On the other hand, healthcare was down slightly. The U.S. accounted for 80 percent of the strategy’s gains.
Drilling down by strategy, macro was off slightly “still caught in the cross-winds of an unwind of post-election pricing” in interest rates and foreign exchange, Balyasny explains. Within macro, it adds that directional strategies “were challenging,” as the market rewarded more relative value approaches.
The firm’s systematic strategy was up a small amount but enjoyed steady performance throughout the quarter. This is a strategy the firm is currently building out. For example, in the first quarter a few portfolio managers went live, while a few others added new strategies.
“We are also starting to see the benefits of expanding beyond equities into systematic futures and FX,” Balyasny tells clients in the letter.
In April Ulrich Brandt-Pollmann began as the firm’s new head of systematic strategies. “We expect to make significant progress on scaling both the quant platform and strategies this year,” Balyasny adds.
Elsewhere, commodities were up slightly, with small losses in metals offset by gains from shorts in agricultural and energy markets. Balyasny is also ramping up this strategy. It currently has six PM teams deploying this strategy.
Credit was essentially flat, as gains from tech and financials were offset by losses in energy. The firm has four long-short credit portfolios and says it is seeking to add one or two “strong teams in the months ahead.”
