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HEDGE FUNDS MAKE A POOR START TO THE YEAR

In Uncategorized on 17/03/2016 at 11:08 am

From NYT Dealbook

Last year was tough for hedge fund managers, but this year is starting to look just as bad and investors are finding it hard to stomach, Matthew Goldstein and Alexandra Stevenson report in DealBook.

The University of California’s endowment fund said it would cut the number of hedge funds in which it invests to about 10 from 32. Some brand-name managers who have recorded big losses for months are facing pressure from investors to redeem their money. The industry’s underperformance has also raised questions about what investors are getting in return for the hefty fees they pay.

Investors are expected to withdraw $25 billion from hedge funds in the first three months of this year, according to a Goldman Sachs Prime Brokerage Services survey of hedge fund investors representing about $425 billion in investments. More than three-quarters of those who planned to redeem money said they would reinvest in other hedge funds.

Well-known firms that bucked the negative trend last year are getting punished this year. Some of this is because of the underwhelming performance in stocks. The basket of 50 stocks, including Apple and Valeant, that Goldman Sachs says hedge funds like most is down 5.6 percent as of March 4.

Some people running funds, like Larry Robbins and William A. Ackman, have fared worse. Positions in companies like Teva Pharmaceuticals and Monsanto have created headaches for Mr. Robbins, while Mr. Ackman is bedeviled by his bet against Herbalife.

Still, it’s not all red ink. Greenlight Capital is up 3.3 percent after losing 20.4 percent. Horseman Capital Management, based in London, is up 9.7 percent this year. And Saba Capital Management is up a little more than 14 percent so far this year.

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