(Corrects spelling of manager's last name in 9th paragraph to
By Svea Herbst-Bayliss and Katya Wachtel
BOSTON/NEW YORK, July 3 Sharp market sell-offs
in June tripped up many veterans in the $2.25 trillion hedge
fund industry with big name managers including Daniel Loeb,
Barry Rosenstein, David Einhorn and Leon Cooperman nursing
losses for the month.
Many funds were caught off guard by the deep market sell-off
triggered by Fed Chairman Ben Bernanke's comments that the
central bank may consider tapering its easy money policies,
including billions a month in bond purchases, by year-end.
The losses took a bite out of solid year-to-date gains among
many hedge funds that had been fueled by a strong stock market
rally at the start of the year coupled with bets that Japan's
economy will finally recover.
With more uncertainty looming, investors looking at the
second half of the year are eyeing rotating their capital away
from fixed income to stock pickers who might be less impacted by
speculation about monetary policy, said several investors who
allocate money to hedge funds.
"We are putting capital where it won't be affected by swings
in interest rates," said Maglan Capital's David Tawil whose
hedge fund is up 23 percent this year after dipping 1.2 percent
in June. "It is a risk I want to live without, because it is not
something you can't plan for or fight."
During the first six months of 2013, the average hedge fund
gained 3.4 percent, preliminary data from Hedge Fund Research
show, while the broader S&P 500 climbed 12.6 percent.
The list of funds that faltered in June includes Barry
Rosenstein's Jana Partners Fund, which slipped 1.3 percent last
month but is still up 10.3 percent for the year, and Leon
Cooperman's Omega Advisors, which fell about 1 percent in June
but is up 10.5 percent for the year, investors in the funds
Loeb's Third Point Offshore Fund and Einhorn's Greenlight
Capital both lost ground in June too but are solidly in the
black for the year to date.
Last month's unexpected selloff in bonds and stocks hit big
and smaller funds alike. Corsair Capital Management, with some
$500 million in assets, lost 1.9 percent in June but is up 7.1
percent this year. Aaron Cowen's recently launched Suvretta
Capital Management is still up 10 percent for the year but
dipped 1 percent in June.
Former UBS fixed income head Sal Naro's Coherence Capital
trimmed holdings of preferred stocks as that market dropped some
15 percent in three weeks, according to a person familiar with
the portfolio. The fund slid 1.4 percent last month, but remains
up 10.6 percent for the year.
BTG Pactual's Global Emerging Markets and Macro Fund, one of
2012's best performing hedge funds, estimates it lost about 2.5
percent in June, according to a person familiar with the
Funds with large exposure to bond markets, particularly
mortgage credit, were hit particularly hard in June when the
yields on Treasuries and agency mortgage securities soared as
the prices of bonds fell.
Many mortgage-focused traders are still tallying recent
performance numbers. Other managers have said they plan to
update investors after the July 4 U.S. stock market holiday.
However, some prominent funds sidestepped the market tumult
in June. One of those was Hutchin Hill, a $1.1 billion hedge
fund run by former SAC Capital manager Neil Chriss, which inched
up 0.1 percent in June, and is up 10.1 percent for the year.
Steven Cohen's SAC Capital Advisors and Kenneth Griffin's
flagship portfolios at Citadel also rose in June, adding to
Roy Niederhoffer's $560 million R. G. Niederhoffer Capital
Management saw its flagship portfolio jump almost 3 percent for
the month through June 21, pushing yearly gains to almost 30
percent, according to an investor letter.
"For hedge funds, June is already the worst month in over a
year and could easily be the worst month since 2011 unless
equities rally," Niederhoffer wrote in a letter dated June 24.
Some managers said quick reaction to changing market
conditions helped cement gains for those who had benefited from
the strong stock market in the first five months of the year.
(Reporting By Svea Herbst-Bayliss and Katya Wachtel; Editing by
Richard Valdmanis, Bernard Orr)