- Bill Ackman’s Pershing Square, David Einhorn’s Greenlight Capital, and $1.4 billion 12 West Capital Management are some of the hedge funds that are flying high so far this year.
- Quants haven’t exactly flopped, but they also haven’t kept up with several funds making concentrated bets.
- Funds that have struggled include BlueMountain Capital and those making volatility bets.
- Click here for more BI Prime stories.
The market-beating human stock-picker is far from dead.
Quant funds now dominate hedge fund flows and assets, but the biggest winners midway through 2019 are funds run by old-school investors who take large, concentrated bets.
Systematic strategies haven’t exactly flopped, and still attracted significant assets. But stock-pickers like Bill Ackman, David Einhorn, and Gabriel Plotkin turned in a blistering first half, proving the era of the star investor is not completely over.
The average hedge fund returned 7.58% through the first half of the year, according to HFRI. Keep reading to see which funds soared, which ones flopped and which ones were in between.
Soared: Concentrated stock-pickers
Reuters/ Allen Fredrickson
After a rough 2018, Bill Ackman promised to "return to his roots," but his performance so far this year is something we have never seen before.
The billionaire founder of Pershing Square posted returns of 45% through the second quarter, the highest mark ever for the fund in the first half.
Bouncing back from a year when "we didn’t get anything right," Greenlight founder David Einhorn has posted returns of 17.4% through the first half of 2019. The noted Tesla short recently added long positions in three stocks: DuPont spin-off Chemours, department store Dillard’s, and gambling company Scientific Games.
An under-the-radar big winner through the first half was 12 West Capital Management, a $1.4 billion hedge fund founded by Joel Ramin, a former analyst for Roberto Mignone’s Bridger Capital.
Ramin’s fund has returned 46.1% through the first half, according to an investor letter of a fund-of-funds that allocated money to 12 West. Filings show that the top 10 positions in Ramin’s portfolio make up more than 90% of it.
Flopped: Blue Mountain Capital
BlueMountain’s flagship Credit Alternatives fund is down roughly 4% through the end of June, and the $18.5 billion manager has been under pressure to reassess its approach.
Affiliated Managers Group, an asset manager that invests in hedge funds like BlueMountain and AQR, said on a recent earnings call that it is working with BlueMountain to bring up its profitability by year-end. The firm has already cut strategies that it deemed unprofitable this year, like its long-short equity and systematic equity efforts.
"As a multi-strategy asset manager, BlueMountain Capital Management continuously assesses and adjusts its investment and business strategies to address clients’ needs, respond to changing markets and optimize performance," the firm said in a statement.
BlueMountain has hired 10 people over the last 12 months to focus on areas where the firm believes it can grow, according to a source close to the firm. These areas include fixed income, healthcare, infrastructure, and collateralized loan obligations.
In between: Quants
Performance at well-known quant funds like Winton Group, Renaissance Technologies, and D.E. Shaw has not been bad this year, but it also hasn’t reached the eye-popping returns they put up in the past.
Renaissance’s Institutional Diversified Alternatives fund is roughly flat through the second quarter. The better-known Renaissance International Equity fund is up 5.3%, but still below the average hedge fund and the broader market.
Winton Group’s eponymous fund has posted a return of 2.74% through mid-July as founder David Harding has rewritten the firm’s quantitative models. D.E. Shaw’s Composite fund, which includes discretionary stock-picking teams as well as quant strategies, is up roughly 6% for the year through the end of June.
Systematica BlueMatrix fund, which runs more than $700 million, is down more than 6% on the year, an investor document showed. The firm declined to comment.
- Lone Pine Capital stock-pickers explain why they’re investing in Tiffany and Nintendo and how they value ‘disruptors’ like Beyond Meat
- The SEC is stepping up scrutiny of mutual funds that have poured money into unicorns like WeWork and Airbnb
- Trump’s trade wars, Brexit, and geopolitical strife is boosting Citigroup’s trade finance business. But it might not last.