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Hedge Fund Focus: November 4, 2016

Ryan FitzGibbon  Follow

In case you missed them, here are the hot topics in the hedge fund space this week…

Despite the turnaround in performance, money is still coming out of the industry. This week Pensions & Investments and Willis Towers Watson released their annual ranking of the world’s largest 500 asset managers, finding that alternative assets declined for the first time in 2015 since 2011. Q3 also marked the largest quarterly outflows for the industry since 2009, with net redemptions totaling nearly $30B.

Those dealing and feeling the pain include the Kentucky Retirement System, who announced they will cut their hedge fund investments by $800M or in half over the next 3 years, and former industry goliath Brevan Howard, who bled another $2B last month, bringing its AUM to nearly half of what it was a year ago. Odey has also taken a major hit, losing nearly 60 percent of its AUM as clients have pulled money after big performance losses.

Fees were center stage this week as some of the industry’s struggling luminary managers announced they will be shaking things up. Bill Ackman’s Pershing Square is giving clients a one-time chance to shift to a new fee structure that will employ a 5 percent hurdle and 30 percent performance fee. And Och-Ziff, who has struggled with an international bribery scandal resulting in low Q3 earnings and a rating downgraded by Fitch to junk, also announced it has reduced its management fee to 1 percent.

Weekly Read: HFI wrote an interesting piece about how despite all the hubbub around CalPERS’ decision to cut all its hedge fund investments, only seven pensions have followed suit. They agree changes are still happening and more outflows are to come, however, they will take the form of bit by bit chipping away as opposed to full pulls,

As October numbers began to roll in this week, there were mixed reviews on if the month continued the industry’s winning streak or if it was a bust:

But despite the index’s mixed findings, several managers are doing a bang up job:

  • Several of the Tiger Cubs, who experienced an extremely rough start to the year, are back in the black
  • Bridgewater Associates brought in nearly double-digit gains for the month
  • Several other macro managers also experienced gains, including Caxton, Rubicon, Tudor, Discovery, Brevan Howard, and Moore Capital; returns ranged between 0.5 and nearly 8 percent
  • Viking Global Investors experienced gains of nearly 6 percent in Q3
  • Dan Loeb’s Greenlight Capital posted returns of 1.2 percent for October

Quick Things to Know: Despite mediocre returns recently, quant strategies continue to pull in money; Jim Chanos and Dan Loeb were both down in October; and fund of hedge funds are still negative for the year.

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