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 Funds who placed a broad array of bets produced some of the
strongest gains, beating star managers like Bill Ackman, David
Einhorn and Larry Robbins who invested more narrowly and ended 2015
with steep losses.
Those who took a more conservative approach - often using large
teams to further diversify investments - posted some of the
strongest gains. Funds to produce double-digit returns in 2015
include Citadel, Millennium Management, Visium Asset Management,
Tourbillon Capital Partners and Blackstone Group's Senfina Advisors,
according to private performance information seen by Reuters.
Those increases came during a year when the average hedge fund, as
represented by the Absolute Return Composite Index, fell 0.13
percent.
The S&P 500 Index gained 1.4 percent, with dividends, but many
investors were burned during a volatile year that included a rout in
the junk bonds of energy companies, plummeting healthcare stocks,
and market gyrations pushed by fears of a Chinese economic slowdown.
Those that beat the odds and won in 2015 underscore the types of
hedge funds large risk-adverse investors such as pensions and
endowments are flocking to.
The firms usually take a neutral approach to the market's ups and
downs, spreading out their bets and avoiding large wagers on any one
idea or theme.
"Having the discipline to stay hedged," said Matt Litwin, director
of research at investment adviser Greycourt & Co., "paid off in a
big way."
TEAMWORK WINS
Hedge funds known for their big teams scored in 2015.
A prime example is Millennium Management, the $34 billion firm led
by Brooklyn-born Israel “Izzy” Englander. Its main Millennium
International fund gained 12.65 percent for the year, according to
performance information seen by Reuters.
Millennium's hallmark is a sea of different investments, including
thousands of bets on stocks alone. The New York-based firm employs
more than 1,800 people and 180 trading teams, making its staff among
the largest in the world for hedge fund.
Millennium's volume of investments are managed for risk by a
separate team of employees and the portfolio is market-neutral,
meaning the value of the bets on securities appreciating in value,
so called longs, are equally balanced with those on them declining,
so-called shorts.
Citadel, the $25 billion fund manager led by billionaire Ken
Griffin, gained 14.3 percent over 2015 in its main multi-strategy
hedge funds, according to a person familiar with the returns.
Citadel's funds, backed by a 700-person investment team, invest in
stocks, bonds, commodities, macroeconomic trends and more. Each
category was profitable for the year, according to the person. The
firm's equity-focused hedge funds also gained 17.2 percent,
according to the person. Both types of funds run at or near market
neutral, meaning they likely benefited substantially from bets
against stocks and other securities.
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Other winning multi-manager, market neutral firms, according to
figures seen by Reuters, include Blackstone's Senfina, the new,
nearly $2 billion unit that gained 23 percent between January and
November; Jacob Gottlieb's $8 billion Visium, whose Global Fund
gained 10.3 percent in 2015; Ari Glass’ $190 million Boothbay Fund
Management, whose main fund gained an estimated 10.15 percent for
the year; and Dmitry Balyasny’s $8.1 billion Balyasny Asset
Management, whose Atlas Enhanced Fund gained about 5.9 percent in
2015.
To be sure, such funds can lose money, even if they aggressively
attempt to manage risk, because they often use leverage, or borrowed
money, to increase the size of their bets.
The Absolute Return Multi-Strategy Index fell nearly 10 percent in
2008. It was the only down year for the hedge fund strategy since
tracking began in 1998; last year, the average gain was 2.25
percent.
BETTING BOTH WAYS
Other funds with more centralized investment management also did
well by spreading their bets, especially shorting stocks.
Eton Park Capital Management, led by Eric Mindich, formerly of
Goldman Sachs, gained 7.5 percent for the year in its main fund. The
$9 billion firm's bets on Japan, derivatives and stocks, both long
and short, drove the returns, according to a person familiar with
the situation.
Tourbillon, led by SAC Capital Advisors and Carlson Capital veteran
Jason Karp, gained about 11 percent over 2015, according to a person
familiar with the situation. The approximately $4 billion firm rose
on both long and short bets on stocks, according to the person. They
included winning bets on travel business Expedia rising and a wager
on biopharmaceutical company MannKind Corp. falling.
And Anson Group, the $500 million firm based in Dallas and Toronto,
scored a 16.2 percent gain last year in its main hedge fund,
according to a person familiar with the situation.
The performance was driven by many small stock picks, especially
bets on their decline, the person said. The fund is managed by Bruce
Winson, Moez Kassam and Adam Spears.
All three firms run portfolios that are at or close to market
neutral. Firms contacted for this story did not respond to requests
for comment or would not speak on the record.
(Reporting by Lawrence Delevingne; Editing by Alan Crosby)
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