| BOSTON, July 5
BOSTON, July 5 Hedge funds have little to brag
about halfway through 2012, with some of the biggest names
reporting only small returns and trailing the benchmark U.S.
Paul Tudor Jones' flagship fund is up 1.59 percent through
the third week in June, David Einhorn's biggest portfolio is up
3.7 percent in the first half, while Daniel Loeb told investors
that his largest fund rose 3.9 percent during the first six
months of 2012, investors in their funds said.
Compared with a year ago when many hedge funds were losing
money, these returns might sound like something to cheer,
especially since they beat the benchmark HFRX Global Index's
1.22 percent gain.
But they pale measured against the 8 percent rise in the
Standard & Poor's 500 stock index during the first half, with
the $2.1 trillion industry failing to wow at a time that public
pension funds are increasingly turning to hedge funds to shore
up ailing returns.
The industry's underperformance may again raise questions
whether it makes sense for institutional investors to pay hefty
fees to managers when they can get better returns by buying
shares of low-cost index funds. Unlike most other portfolios,
hedge funds take a management fee plus a performance fee that is
often 20 percent or more.
Europe's seemingly endless debt crisis is getting much of
the blame for the year's anemic returns, but fears about U.S.
growth and how China will perform are also making for uncertain
trading conditions, experts said.
"People are over-managing their positions," said Peter Rup,
chief executive and chief investment officer at Artemis Wealth
Advisors, explaining that funds moved to short positions only to
see those turn against them when markets rebounded after having
There are some bright spots, with some managers who
specialize in selecting stocks making savvy picks and some
managers specializing in credit also performing well.
Leon Cooperman's Omega Advisors Inc was up 10 percent in the
first half, benefiting from its long-time investment in student
lender Sallie Mae, whose shares have rebounded recently.
Marcato Capital Management, founded by Mick McGuire after he
left Bill Ackman's Pershing Square Capital Management, jumped
12.7 percent in the first half.
Andor Capital Management, run by technology investor Dan
Benton, who recently came out of retirement, is up 6 percent,
while Steven Cohen's SAC Capital Advisors, one of the industry's
most closely watched funds, was up 5.2 percent in the first
Boaz Weinstein's Saba Capital, which took the other side of
some of the trades that resulted in huge losses for J.P. Morgan,
was up 2.3 percent through the third week of June. Blue
Mountain, another fund that also made money on the other side of
J.P. Morgan's failed trades, was up 9.54 percent through the
third week of June, a person familiar with the numbers said.
And among the funds managed by men who commanded the biggest
salaries in the industry only a few years ago, Kenneth Griffin's
Citadel notched a 9 percent increase in the first half.
There are losers as well, including the two men who made the
most off betting against the subprime mortgage market. Philip
Falcone, now being sued by financial regulators and often slow
in releasing his numbers, told investors his Harbinger II fund
was off 33 percent during the first five months of 2012. John
Paulson's Advantage Plus fund was off 10 percent through the
first five months of the year.