U.S. Markets

Multi-manager hedge funds suffer losses in first-half 2016

BOSTON/NEW YORK (Reuters) - It only took six months for some of the world’s most prominent team-based hedge funds to go from winners to losers.

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid

Blackstone Group’s Senfina Advisors, Citadel’s Global Equities Fund and the Visium Global Fund were among the so-called multi-manager funds that cut into last year’s sizable gains with deep losses over the first half of the year, data seen by Reuters show.

Senfina dropped 15 percent in the January-June period after a 12 percent gain in the second half of 2015, which had helped the fund end last year with a return of roughly 20 percent.

Folger Hill Partners, run by former Steven Cohen deputy Solomon Kumin, lost about 7 percent in the first half while Alyeska Investment Group, run by Anand Parekh, was off about 8 percent, the numbers show.

The HFRI Equity Market Neutral Index - a strategy benchmark - is flat for the first six months of 2016 while the Standard & Poor’s 500 index climbed 2.9 percent.

The returns mark a turnaround for a strategy that was an industry darling in 2015 when strong performance and a promise of more diversification attracted pension funds and other investors to add billions of dollars in fresh capital.

Multi-manager funds use a stable of small portfolio manager-led investment teams paired with central risk oversight. They seek to avoid broad correlation to the rise and fall of stocks and other securities through a multitude of offsetting bets, or a so-called market neutral approach.

A rare winner in the category this year is the Crestline Summit Equity Alpha, a nine portfolio manager, $246 million strategy that gained 2.6 percent in the first half, according to a person familiar with the situation.

But many funds have struggled since early this year when equity markets declined sharply on such fears as slow growth in China, low oil prices and uncertainty over the direction of U.S. interest rates.

After some recovery in April and May, June was another tough month when stocks were briefly hit hard when Britain voted to leave the European Union.

Senfina dropped 3.5 percent in June, but was up 2 percent for the second quarter while Alyeska fell 4.5 percent last month.

Citadel Global Equities was off 6 percent in the first half, but trimmed losses in July and is now down roughly 3.5 percent through the end of this month, a person familiar with the numbers said.

Folger Hill was up 1 percent in the first two weeks of July, a person familiar with their numbers said.

The Visium Global Fund lost 2 percent in June and was off 4.9 percent in the first half after a 4.2 percent gain in the second half of 2015. The fund will soon be shuttered along with other Visium offerings after the fallout from an insider trading probe.

Visium, like other firms mentioned in the story, either declined to comment or did not respond to requests for comment.

Reporting by Svea Herbst-Bayliss and Lawrence Delevingne