August was a brutal month for some of the biggest names in the hedge fund industry.
In some cases, losses in August wiped out gains for the year and sending them back to zero, and now it will now be a race against time to rebound and finish the year in the black.
Bloomberg News’ Simone Foxman reports that billionaire hedge fund manager John Paulson, who runs $US19 billion Paulson & Co., got crushed in August.
Here’s a rundown of how some of his funds performed:
- Paulson Partners, fell 4.2% in August, leaving the fund up 6.5% for the year.
- Paulson’s Advantage fund fell 4.9% in August, and is now down 3.6% for the year.
- Paulson’s Special Situations Fund fell 8.4% in August, and is now down about 12% for the year.
Paulson had his second-worst performance ever last year, with his Advantage Plus fund falling 36% and his Advantage fund falling 29%. In 2014, Paulson Partners ended the year up 0.8%, while the Enhanced fund fell 1.6%.
Paulson, of course, isn’t alone.
Activist investor Nelson Peltz’s Trian Partners fell 4.8% in August leaving the fund down
3.45% for the year, Reuters’ Lawrence Delevingne reported.
Peltz has only had one losing year: his fund lost 19% during the financial crisis in 2008.
Activist investors like Dan Loeb, David Einhorn, and Bill Ackman all took a hit in August, too.
Here’s the rundown:
- Loeb’s Third Point Off Shore fund, which employs an event-driven and value investing strategy, fell 5.2% and was last up just 0.1% for the year.
- Einhorn’s Greenlight Capital flagship fund fell 5.3% in August, bringing the fund down 14% for the year.
- Ackman’s Pershing Square Holdings fell 9.2% in August, leaving the fund down 0.1% for the year.
There’s a broad perception that hedge funds are created to manage risk and generate returns in all market environments. The wild market swings in August made it clear however that showed that in the short run, it doesn’t always work that way.
The average hedge fund was down 2.2% in August, according to data from Hedge Fund Research, compared with the S&P 500, which fell 6.2%. August was a wild month for the stock market overall, with the the Volatility Index (VIX) hitting its highest level in four years while markets got clobbered on August 24.
“People call us a hedge fund,” Ackman said on CNBC on Friday. “From an industry perspective, we need to explain better what a hedge fund is.”
What Ackman is saying is that the activists like himself tend to be long-biased — meaning they bet that stock prices will go higher — and take a handful of highly concentrated positions in publicly-traded companies. And so when the broad market sells off, funds like this are likely to also see losses.
“I can’t tell you where any of our stocks are going to be next month,” Ackman said on CNBC, adding that he thinks the businesses his fund owns like Mondelez will be much more valuable in the long-term.
So far in September, Ackman’s fund is up 0.4%, leaving the fund up 0.3% for the year.
Business Insider Emails & Alerts
Site highlights each day to your inbox.