The Morning Brief: Stark Disparity Between Profitable, Unprofitable Funds

June 22, 2017   Stephen Taub

Hedge funds in eVestment’s database are up 3.2 percent on average this year.

Nearly three-quarters of hedge funds tracked by eVestment are in the black this year, but the disparity between profitable and unprofitable funds is rather stark. Profitable funds are up 6.44 percent on average, compared with a 5.28 percent loss for funds in the red. The average hedge fund in eVestment’s database is up 3.2 percent this year, including 0.21 percent last month. "May performance was led by funds focused on corporate capital structures, while commodity and currency funds continue to be the primary drag on industry performance," eVestment said in its report.

Equity strategies are leading the way, yet fewer than 10 percent of long-short equity funds focused on U.S. markets are outperforming the S&P 500 this year. In addition, virtually no Europe-focused long-short equity funds are beating the regional indices, according to the report.

The $3.13 trillion hedge fund industry received $10.52 billion of capital from investors in May, boosting inflows this year to $23.32 billion, eVestment said.

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Boaz Weinstein’s Saba Capital Management filed a new 13D on a closed-end mutual fund. The credit-oriented manager, which recently bet on closed-end funds trading at steep discounts to net asset value, said in a regulatory filing it owns 9.999994 percent of First Trust Strategic High Income Fund II. The fund is trading at a 7.63 percent discount to NAV. In the filing, Saba said the stock is "an attractive investment opportunity" and it may engage management, the board of directors or other shareholders. This is the second closed-end fund Saba has filed a 13D with this month.

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Sachem Head Capital Management said that on June 21 it sold 6.25 million shares of Autodesk for $102.75 per share. This reduced its stake to 3 percent. In a regulatory filing, the hedge fund said it sold the shares "for portfolio management purposes," noting the stock’s "significant outperformance had caused it to become disproportionately large" relative to its other holdings. We reported earlier this week that Sachem Head’s Scott Ferguson resigned from the board of the software maker.


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