Morning Brief: Hedge Funds Post Small Gain in April

May 11, 2018   Stephen Taub

Activist funds posted the biggest gains last month, while relative value and macro strategies lost small amounts.

Hedge funds posted an average gain of 0.38 percent in April, bringing their return for the year to just 0.20 percent, according to a new report from data tracker eVestment. Activist strategies led the way, generating 2.21 percent returns last month. However, they are only up 0.27 percent for the year. Relative value credit and macro strategies, however, lost money in April, although very small amounts. Managed futures eked out a small gain in April. But they remain in the red for the year, down 2.32 percent, making it the worst performing strategy this year. Less than 30 percent of managed futures funds tracked by eVestment are in the black so far in 2018, according to the report.

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The Baupost Group said in a regulatory filing that it agreed to exchange notes and $10 million with Keryx Biopharmaceuticals for $164.75 million of zero-coupon convertible senior notes due 2021 in a private placement. The new notes are convertible into as many as 35.58 million shares of common stock. The eclectic investment firm, headed by Seth Klarman, said it is paying a total of $125 million of notes plus $10 million of cash.

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Shares of hedge fund favorite Booking Holdings fell 4.75 percent, to $2,080.02, after forecasting 7 percent to 11 percent room-night growth in the second quarter, which was below expectations. Wall Street analysts had a mixed reaction to the news from the company, formerly called The Priceline Group.

For example, Credit Suisse trimmed its estimate from $2,300 to $2,250, but raised its estimates. "The trade-off/benefit to the lower growth is higher margins and profit dollars, some of which is being redeployed on what appears to be a long-term move to change the product offering from a pure hotels-only transactional proposition to what we presume should be an intermodal travel service to essentially replicate what traditional agencies put together in the form of an all-in, packaged (adding flights, attractions, etc.) experience," it stated in a note to clients.

According to marketwatch.com, SunTrust Robinson Humphrey cut its price target to $2,300 from $2,380 but maintained its buy rating on the stock. "While 2Q outlook for room-night growth was below Street expectations...we note that this is in part self-inflicted and driven by the changes made by Booking on performance advertising channels," the report stated, according to marketwatch.com.

On the other hand, UBS raised its price target from $2,250 to $2,320 and maintained its buy rating.


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