News:

 

Some macro fund outliers, including Tudor, Brevan Howard and Element, dodged the bloodiest August in five years, where almost 65% of funds lost money, according to Eurekahedge. It’s the second-worst August since the data provider started tracking it nearly two decades ago. Managers, and macro traders in particular, find it hard to make money in August due to thin trading volumes, political surprises and people on their summer breaks

 

Still, investors are returning to macro funds, which pulled in $15.2 billion through August this year, the most of any strategy. The funds had net inflows of $3.5 billion in August, according to eVestment. Last year, they raised a total of $9.4 billion. The industry pulled in $4.7 billion in August, bringing the year’s total to $15.4 billion. Last year, funds raised $27.7 billion. Managed futures saw outflows of $3 billion in August and $8.9 billion for the year.

 

Baupost, Elliott and D.E. Shaw are among funds that hit the jackpot with big bets on Sky as Comcast landed a knockout bid for the broadcaster. The offer netted Sky’s top 10 independent shareholders a collective 730 million pounds ($959 million) over the weekend, according to Bloomberg data. Baupost, which a year ago said it held more than 1% in Sky, has made a 95% internal rate of return by doubling down on its bet, Bloomberg analysis showed.

 

Manny Friedman’s $6.9 billion EJF is raising money for real estate projects in low-income neighborhoods, in order to take advantage of incentives from last year’s U.S. tax overhaul. The fund will start by bankrolling ground-up development in designated zones across the country. EJF is seeking to raise about $500 million, people familiar said. It plans to partner with developers nationally and is looking to take equity stakes in a diversified projects.

 

Two Sigma’s David Siegel and John Overdeck are using a collateralized fund obligation at Sightway Capital, which invests part of their fortune. The CFO raised $216 million through a securitized note sale last month, the company said. The notes will be repaid by the cash flows from stakes in 32 private equity funds. Firms that use CFOs for financing begin by pooling stakes in PE funds, and then issue asset-backed bonds. Read more here.

 

Varma Mutual Pension Insurance may shift more money into global macro fund and shrink credit long-short exposure later this year or in 1H19, said Kai Rimpi, director of hedge funds. "It’s just very difficult to generate the risk-adjusted returns we’re looking for," he said. The $53 billion Finnish pension already cut credit long-short over the last two years to 5% from 15%. Macro may climb to 18% from 15%. Its hedge fund bets rose 3.4% through June.

 

After almost a year of behind-the-scenes work, John Paulson has formed a coalition with 15 other investors aimed at curbing years of what his fund called value destruction in the gold sector. Tocqueville General Partner John Hathaway and activist Livermore are among those who have agreed to join the Shareholders’ Gold Council, it said in a statement. The group intends to ensure miners’ management and boards are aligned with shareholder interests.

 

Connecticut’s fund managers may have more to like about the state’s workaround for a cap on state and local tax deductions. Not only do those who live and work in the state get a break on their property taxes, they can also shave the tax bill for their carried interest profits. It could translate to hundreds of thousands, or even millions, of dollars in federal tax savings on carried interest for managers at funds like Viking and Lone Pine. Read more here.

 

The Alabama Trust Fund is seeking proposals from fund of fund managers for an allocation of up to $150 million, according to an RFP on its website. Managers must have at least $2 billion in AUM and a 10-year track record.

 

An AQR paper finds that buying options to profit from an equity-price swing surge is typically a losing proposition, even if volatility jumps. Thank the persistently huge disparity between expected moves and what comes to pass. And it’s the fuel for the enduring boom in the short-vol trade. "Many proponents of long volatility exposure often advocate this trade in a low implied volatility market environment," Roni Israelov and Harsha Tummala write.

 

Hedge funds won’t lower fees because portfolio running costs are rising, a study showed. More than 75% of the 140 global managers who responded to PwC and AIMA don’t plan to cut charges. As for their performance: Returns slipped 0.18% in August as fixed-income directional and multi-strategy investments fell, according to the Bloomberg Hedge Fund Database.

 

Credit traders at some large banks are convinced hedge funds have penetrated their members-only club. They claim rivals and even clients can now access info from trading platforms operated by interdealer brokers that allow the banks to anonymously unload unwanted positions and gain pricing intelligence. Pressure by interdealer brokers to boost commissions is prompting them to let others onto the platforms, credit traders say.

 

Closures

 

BNY Mellon plans to shut its fund of hedge funds unit and return $2.1 billion in assets to investors by the end of November. BNY’s EACM is closing because "the overall demand for fund of hedge funds strategies has diminished," Des Mac Intyre, BNY’s chief executive of U.S. asset management, said in a statement. The bank will hang on to $1.8 billion that’s run in two long-only mutual funds.

 

Emerging Sovereign Group is returning money to investors after almost two decades. Its founders plan to make bigger and riskier bets trading their own capital. ESG, which focused on EM and was backed by Julian Robertson, will return $1.3 billion to clients, according to a letter. Investors will get their money back by the end of the month, a person familiar said. Most of the assets were from clients who had their money locked up for five years.

 

Karim Abdel-Motaal is closing his macro fund after just over a year because he couldn’t raise enough money. The London-based money manager, who previously led EM funds at Man Group’s GLG unit, started the fund in June last year, investing globally with a focus on developing markets. The fund, part of his firm KAM Portfolio Management, returned about 5% before fees this year, outperforming peers which suffered losses.

 

Palm Lane Credit Opportunities Fund’s liquidation may temporarily restrain the pace of CLO issuance. It provided temporary capital to CLO managers, with positions accounting for 41% of the NAV of the $1 billion fund, according to documents. Palm Lane’s warehousing may have provided as much as 10% of all such U.S. funding, according to market participants. Managers are waiting to see the impact of the exit on the CLO market.

 

Launches

 

Former Point72 manager Travis Kling is set to start his own fund focusing on digital assets. Ikigai will launch on Oct. 1 with partners’ capital and expects to add $15 million of outside capital on Nov. 1. Kling plans to increase Ikigai’s tokens portfolio to $100 million and its venture fund to $33 million by mid-2019, depending on market conditions. The Delaware-based fund will also have a Cayman Islands vehicle for foreign investors.

 

Singapore-based family office AJ Capital is planning to start a hedge fund that will focus on lending money to businesses in Asia’s health-care and education sectors, said a person familiar. The fund is expected to launch in March and target firms in Southeast Asia and India. The planned minimum external capital is expected to be about $100 million. Abhinav Jhunjhunwala, an ex-analyst at San Francisco-based Valiant, started AJ Capital in 2012.

 

Pictet will start an equity fund for institutional investors seeking protection against swings in Japan’s market. The market-neutral fund will be offered from Sept. 27, taking long and short positions in listed Japanese firms, mostly large caps, said Teruhiko Nishimura, who is in charge of the strategy. Pictet’s existing market-neutral fund has expanded 10-fold over the past two years to about 96 billion yen ($853 million) as of Aug. 31, said Nishimura.

 

On the Move

 

Steve Cohen’s Point72 hired two execs from Goldman Sachs and Millennium to oversee finance and tech at the $13 billion fund after several high-profile departures. Gavin O’Connor will start next month as CFO and COO, replacing Tim Shaughnessy, who joined Point72 three years ago, according to an internal memo. Shaughnessy plans to retire at year-end. The firm also hired Mark Brubaker as chief technology officer. He starts next April.

 

Cheyne has hired Richard Cazenove as a senior portfolio manager, who will follow a number of his ex-colleagues from BlueBay to the London firm. Cazenove is joining a team being set up by Anthony Robertson, the CIO of its newly formed distressed-debt business, Cheyne said in a statement. Robertson joined Cheyne last year. Cheyne said it recruited Franck Laval, previously a distressed-debt manager at Oaktree, earlier this year.

 

Halcyon Capital hired Philip Raciti as head of U.S. performing credit and portfolio manager, focusing on the management of U.S. senior loan portfolios at the firm, according to a statement. Raciti previously served as senior managing director and portfolio manager at CVC Credit Partners.

 

Citadel hired RBC Capital Market’s Razzy Ghomeshi, said people familiar. Ghomeshi, who was RBC’s head of U.S. investment-grade trading, will be an investment-grade portfolio manager at Ken Griffin’s fund. At RBC, he will be replaced by credit trader Charlie Shah. Separately, Citadel hired Ben Owens as a senior associate on the energy team in its Aptigon unit. Owens spent just under five years at RBC Capital Markets, according to LinkedIn.

 

Market Calls

 

Point72 has almost tripled its stake in agribusiness giant Bunge, which has been the subject of takeover speculation over the past year. Point72 owns 7.1 million shares, representing a 5% stake in White Plains, New York-based Bunge, according to a regulatory filing. That’s up from 2.4 million held at the end of 2Q. Based on Sept. 20 closing price, the stake is worth $467 million and makes Point72 the fourth-largest shareholder in Bunge.

 

Emerging markets may rebound when the mid-terms are out of the way, said Finisterre Capital. CIO Damien Buchet, who correctly called the end of the EM bull run in February, regards the dollar rally as all but over and sees risks in Brazil, Russia and Argentina passing soon.  

 

Stephen Diggle, who made money on vol bets during the financial crisis, isn’t betting on similar fluctuations now. Governments and central banks see themselves as "guardians of the capital markets" and will always be ready to provide liquidity to prevent a repeat of the unprecedented price swings a decade ago, said the Vulpes CEO. He is "far more worried" about an escalation in trade tensions between the U.S. and China than the EM selloff.

 

Tribeca Investment said the lithium industry may see consolidation after producers and prices fell this year and miners seek acquisitions to get a slice of the EV battery supply market. Battery raw materials will be among areas of focus for Tribeca’s new listed investment firm, which is raising at least A$250 million ($182 million) in an IPO. The firm is investing in copper and zinc in Canada, and producers, on a belief that a base metals selloff is overdone.

 

Kapitalo’s Carlos Woelz is putting on the brakes ahead of next month’s Brazil presidential election. He said that while companies are in a better position than they were a few years ago, there’s just too much going against Brazil to be bullish. Within equities, he’s more optimistic on pulp and paper, logistics, utilities, health care, mining and banks; he’s shorting consumer, education and real estate stocks; and is long the U.S. dollar versus the real.

 

August returns:

 

Europe

 

 

Asia

 

 

US

 

HSBC Top & Bottom Funds of 2018-09-25