| Kenneth Griffin, Citadel (Bloomberg) |
Multistrategy funds seemed to emerge from the turmoil and market volatility immediately following the late-June Brexit vote mostly unscathed.
Many of the best-known multistrategy funds posted either very small gains or losses for the entire month of June. “We were flat,” confirms one manager when asked on background how his firm fared following the UK vote to leave the European Union.
“Most multistrategy funds don’t have a lot of net exposure" to the stock market, explains one investor with several investments in the strategy. He says Brexit had the biggest impact on long-short funds and funds with European exposure.
On the other hand, funds with big bets on bonds benefited, as interest rates continued to sink to new record lows. And except for the selloff in the British pound, the currency markets were relatively quiet following the historic vote.
One of the best-performing multistrat funds this year is Paloma International, managed by Greenwich, Connecticut-based Paloma Partners, headed by Alpha Hedge Fund Hall of Famer S. Donald Sussman. It was up 40 basis points -- or 0.4 percent -- in June. As a result, it is up 2.4 percent for the year.
Paloma is typically a lowvolatility, hedged fund that mostly focuses on quantitative strategies. It generally does not devote much attention to the equities market.
Chicago-based Citadel’s flagship Kensington and Wellington funds, on the other hand, do typically have sizable bets on stocks. The funds suffered a 0.48 percent loss last month. They are now down 4.60 percent for the year.
Last year Kensington and Wellington each gained 14.3 percent during a very rough year for many markets, including stocks. Yet, as we earlier pointed out, it was Citadel’s worst year since 2010, underscoring the strength of its recent five-year run.
Israel (Izzy) Englander’s Millennium International, meanwhile, was off by just 23 basis points last month, reducing its loss for the year to 1.16 percent. The fund is managed by Millennium Management.
The New York firm, which like many multistrategy funds reduced risk earlier in the year, has about 195 different trading teams managing its assets across several broad strategy areas: relative value, fundamental equity, statistical arbitrage and quantitative strategies, merger arbitrage and event driven, fixed income, and commodities.
Atlas Global Investments, managed by Dmitry Balyasny’s Chicago-based Balyasny Asset Management, also posted a small loss last month. It slipped just 27 basis points and is now down about 3 percent for the year.
The main fund managed by Hutchin Hill Capital, the New York-based firm headed by Neil Chriss, dropped just 20 basis points last month. This trimmed its gain for the year to 60 basis points. Chriss, a quant specialist, was a managing director at Steven Cohen’s SAC Capital Advisors a decade ago. The firm makes both fundamental and quantitative bets, emphasizing four areas: global equities, fundamental long-short credit, global macro, and systematic and quantitative strategies.
We earlier reported that the OZ Master Fund, managed by New York-based Och-Ziff Capital Management Group, lost 0.91 percent last month, extending its loss for the year to 2.14 percent. The firm’s OZ Asia Master Fund fell 0.59 percent in June and 3.56 percent in the first half of the year, while its OZ Europe Master Fund was off 1.49 percent and 1.61 percent, respectively.
The upshot of the first-half returns: Unlike many long-short and event-driven funds, multistrategy funds that are losing money are not in a deep hole and are still in good position to potentially post strong gains this year.
