Hedge funds hit by June sell-off even as many still boast 2013 gains
(Reuters) – Sharp market sell-offs in June tripped up many veterans in the $2.25 trillion hedge fund industry with big name managers including Daniel Loeb, Barry Rosenstein, David Einhorn and Leon Cooperman nursing losses for the month.
Many funds were caught off guard by the deep market sell-off triggered by Fed Chairman Ben Bernanke’s comments that the central bank may consider tapering its easy money policies, including billions a month in bond purchases, by year-end.
The losses took a bite out of solid year-to-date gains among many hedge funds that had been fueled by a strong stock market rally at the start of the year coupled with bets that Japan’s economy will finally recover.
Posted in Events, Finance, Hedge Funds, Opinion
Tagged Ben Bernanke, Central Bank, Chairman of the Federal Reserve, Daniel Loeb, David Einhorn, hedge fund, Leon G. Cooperman, Reuters
Investor fascination with hedge funds has been on full display for the past two weeks as managers filed their quarterly holding reports, known as 13Fs. Everyone wants to know what John Paulson or David Einhorn or David Tepper is loading up on and what they’re getting rid of. And yes, there’s an exchange-traded fund to feed that fascination. It’s up 52 percent since its inception less than a year ago — 18 percent more than the S&P 500 Index.
Rich Returns From a Poor Man’s Hedge Fund
The Global X Top Guru Holdings Index ETF (GURU) sounds a bit gimmicky, but its inner workings are more sophisticated than its name. GURU’s methodology is to scour 13F filings and buy the biggest stock holding from each hedge fund. Filters are put in place to eliminate funds that have high turnover rates — those that do a lot of rapid-fire buying and selling — and the ETF considers only hedge funds with concentrated top holdings. In other words, it screens for stocks that hedge funds are committed to, which makes it a sort of greatest hits of hedge fund stock picks.
The outperformance of GURU, which has 80 percent of its assets in U.S. stocks, over the S&P 500 is partly due to the fact that it is an equal-weighted portfolio. That means that smaller juggernaut stocks like Pandora (P) and GameStop Corporation (GME) are given roughly a 2 percent weighting just like giants such as Microsoft (MSFT) and AIG (AIG). By contrast, market-cap-weighted ETFs tend to drown out small stocks’ gains and get hit harder by overvalued larger stocks coming back down to earth.
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Tagged 13Fs, assets, average cost, convenience, David Einhorn, David Tepper, exchange-traded fund, expense ratio of 0.75 percent, good investment, Hedge Funds, inflow, JAT Capital Management's, John Paulson, Liberty Media, overvalued, quarterly holding reports, Schwab U.S. Broad Market ETF, stock picks, The Global X Top Guru Holdings Index ETF, top holding, top holdings
According to Forbes’ Nathan Vardi, last year the billionaire hedge fund manager David Einhorn predicted that Apple’s market capitalization could hit $1 trillion. He long ago made Apple one of his hedge fund’s biggest holdings and in a letter dated just two days ago Einhorn told his investors he had purchased more Apple shares as the price declined late last year. “We used the lower prices as an opportunity to repurchase the shares we sold in the third quarter,” Einhorn wrote.
Einhorn’s hedge fund was down 4.9% net of fees in the fourth quarter of 2012, thanks partly to the performance of Apple’s shares. “Our Apple was bruised,” he noted to his investors. The question now is, will Apple sink Einhorn and other hedge funds in 2013?
Einhorn’s hedge fund peformance, by his own account, was “pedestrian” last year. Like most hedge funds, Einhorn’s Greenlight was up in 2012, but it underperformed the U.S. stock market. In Einhorn’s case he was up 7.9% net of fees while the S&P 500 returned 16%. That’s actually a little better than the average hedge fund.