Hedge Fund Focus: May 20, 2016
In case you missed them, here are the hot topics in the hedge fund/alternatives space this week…
On the heels of Milken and SALT, chatter about the state of the industry continued this week. Pensions & Investments tried to lay the swirl to rest, writing that predictions the industry is coming to an end are premature. But despite the outlet’s attempts to put a lid on it, The New York Post fueled the fire, reporting the industry could lose upwards of $500B in capital this year, citing commentary from unnamed investors at SALT.
However, performance continued to rebound with Lyxor’s index showing funds were up on average 0.5 percent through mid-May. Macro managers, who to date have had a tough year, as well as long/short and managed futures strategies led the gains. However, HFR reported mixed results. Its Market Directional Index was up 0.31 percent but its Global Hedge Fund Index was down 0.25 percent for the same time period.
Cliff Asness of AQR had a temper tantrum this week over the way Institutional Investor’s Alpha calculates incomes for its annual Rich List. He tried in vain to explain that the figures are inflated because they include money that managers make on their own personal investments.
Despite experiencing strong gains last month, Omega Advisors continued to bleed cash. The luminary manager has lost 22 percent of its AUM this year on the heels of losing nearly 30 percent last year. Redemption requests due to poor performance drove the withdrawals in both cases.
Hedge fund fees destroy value for asset owners according to a new study by CEM Benchmarking. The group found that over a 15 year period ending in 2014, alpha generated by managers (0.97 percent on average) greatly lagged fees (2.85 percent on average), netting investors -1.88 percent.
There was good news for Boaz Weinstein’s Saba Capital who won a round in its legal battle against a Canadian pension fund that is accusing it of violating redemption rules. However, not everyone experienced the same joys. The SEC and Justice Department continued their insider trading investigation into Visium and, amid its bribery investigation, Och-Ziff decided it was a smart idea to take out a $50M loan for a corporate jet. The firm has already borrowed $120M to prepare for a settlement.
A group of luminary managers, including Ackman, Loeb, Icahn, Singer and Rosenstein, have formed a new lobbying arm to promote the benefits of shareholder activism across the U.S. economy. And in other activist news, Icahn protégé Cortex is pushing floundering Pandora to sell itself despite strong company opposition and Volkswagen is trying to play nice with TCI, even agreeing to overhaul executive pay.