Hedge Fund Focus: September 23, 2016
In case you missed them, here are the hot topics in the hedge fund space this week…
Big news came in the middle of the week as the SEC announced it had filled insider trading charges against Leon Cooperman and his fund Omega Advisors after a 5-year investigation into the firm. The SEC alleges that Cooperman used his status as Atlas Pipeline Partners’ largest shareholder to obtain non-public information from an executive at the firm ahead of a deal that he in turn traded on to make a major profit in 2010. Cooperman denied the allegations but acknowledged that either way the charges will ultimately ruin his business and he is considering shutting down.
On Monday, Pensions & Investments released is annual Largest Hedge Funds ranking, finding that over the last year (from July 2015 to June 2016) industry assets continued to decline with 58 percent of managers seeing outflows and only a quarter experiencing asset growth/stabilization. But despite P&I’s findings and August marking the fourth consecutive month of outflows, redemptions did slow last month and industry assets are still up YTD. However, SS&C GlobeOp’s forward redemption indicator did tick up for September.
Small managers are doing better this year than their larger, more well-known peers, according to new data from eVestment, which found that managers under $250M are up 4.1 percent on average YTD, while managers over $1B are only up 1.4 percent. However, the trend is not consistent across the board as proved by Sir Michael Hintze’s CQS, which is hitting it out of the park, returning 18.3 percent YTD.
Though the Tiger Cubs are experiencing widespread losses that may be difficult to undo before yearend, there may be one exception: Lone Pine, which is successfully turning around earlier losses. The firm is up about 1 percent YTD and while not huge it is a big reversal from Q1 when it was down 8 percent.
Despite a ton of pressure on fees, nothing has really changed on the whole, according to Preqin. But when we drill down there is some movement at the new manager level. Only 32 percent of new funds are employing the standard 2 and 20 fee structure as they look to stand out in the market.
Weekly Read: The Financial Times wrote an interesting story at the onset of the week about how a new study from Cambridge University found that traders who are more sensitive to their “gut feelings” outperform computers and algorithmic trading, dampening the current fanfare around quant funds, which all of a sudden are doing terribly.
Quick Things to Know: Funds dipped slightly last week, down 0.8 percent due to market concern about the pending presidential election and the timing of a Fed rate hike; investors are fleeing multistrat funds due to continued poor performance; and funds are expanding in Asia, including Brevan Howard, Caxton and Balyasny, as well as Point72, which recently went on a hiring spree in the region.