BlueMountain Capital Management — the hedge fund firm fighting a proxy battle over the future of bankrupt California power company PG&E — has another problem.
Its main fund, BlueMountain Credit Alternatives, is down 4 percent for the year through April 5, according to HSBC’s weekly hedge fund performance report.
BlueMountain’s fund, which per regulatory filings owns over 4.7 million shares of PG&E, is one of the top 20 losers for the year, according to HSBC.
Although it’s unclear how much the utility company’s falling fortunes impacted the credit fund’s performance, PG&E shares were down 20.59 percent for the year through April 4, following the firm’s filing for bankruptcy protection in January.
BlueMountain had added to its stake during the quarter as the stock tumbled.
[II Deep Dive: BlueMountain Pushes Back on PG&E’s Plans to File for Bankruptcy]
On Friday, the stock recovered most of the year’s losses after California Gov. Gavin Newsom released a report that criticized PG&E for its role in the wildfires, hinting that the state could push to break up the utility company.
Newsom also suggested that the costs of the wildfires should be spread beyond utilities and that the government could help pay for the damage. The stock popped by more than 19 percent.
“After years of mismanagement and safety failures, no options can be taken off the table to reform PG&E, including municipalization of all or a portion of PG&E’s operations,” the report stated. The report was prepared by a “strike force” the governor created to deal with the wildfires and climate change.
As of Monday evening, PG&E’s stock was only down by 0.13 percent for the year.
At the end of last year, BlueMountain was the eighth largest shareholder of PG&E with a little more than 8 million shares. Since then, it has added to its stake: The hedge fund firm’s various funds now own over 11.37 million shares, plus options and total return swaps to purchase some 8 million more.
In March, BlueMountain proposed a slate of 13 directors to PG&E’s board that included California hedge fund activist Jeffrey Ubben, the CEO of ValueAct. BlueMountain is not known as an activist investor, but its campaign was named one of the key U.S. activist campaigns launched in the first quarter by Activist Insight, which tracks shareholder activism around the globe.
Another group of hedge funds, including Knighthead Capital Management, Redwood Capital Management, and Abrams Capital Management, were behind the utility company’s recent hiring of Bill Johnson, former chief executive of the Tennessee Valley Authority, as its new CEO.
In addition to hiring Johnson, PG&E named 10 new directors, including Meridee Moore, the founder of San Francisco-based Watershed Asset Management, and Kenneth Liang, the retired head of restructurings at Oaktree Capital Management.
However, PG&E is in the midst of negotiations with BlueMountain over adding some of the hedge fund firm’s nominees to its board, according to published reports.
As of December, other big hedge fund holders of PG&E included Baupost Group, D.E. Shaw Group, Hound Partners, Appaloosa Management, Millennium Management, and Two Sigma.
BlueMountain declined to comment.
