Former head of Citigroup’s foreign exchange division, Anil Prasad, has gathered together about $500 million in start-up capital to begin a macro hedge fund. The fund, Silver Ridge Management, is expected to launch in early April this year.
The fund is expected to set up offices in London and New York. Prasad will be leading a group of several other managers, including Farhand Mehregani, another ex-exec from Citibank.
Prasad’s goal is to top up the fund with $1 billion, excepting money thereafter only on rare occasions, and mostly from investors already in the fund.
Silver Ridge is getting underway as macro hedge funds are beginning to see a more favorable investment environment after close to four years of lackluster returns. Macro managers see the rise in global volatility and divergent economic policies as creating more investment opportunities.
In addition to Mehregani, who was the former chief investment officer of Sciens Alternative Investments, the fund is also employing Santa Federico, former Perry Capital executive, as global head risk; and Anil Joshi from Comac Capital as chief financial officer based in London.
New York-based Two Sigma Investments, managed by John Overdeck and David Siegel, had an exemplary year in 2014.
The firm’s Two Sigma Enhanced Compass fund appears to be one of the best performing hedge funds in 2014, returning 57.55 percent, according to an investment report which Forbes reviewed. A sister fund, the Two Sigma Compass Fund netted 25.56 percent. The two funds together, Two Sigma Compass strategy, manages over $5 billion.
Two Sigma utilizes quantitative investment strategies, and has distinguished itself by its excellent performance in 2014 from the vast majority of hedge funds, which were struggling for most of the year.
Two Sigma was founded in 2001 by Overdeck and Siegel, both of who having been previously employed at DE Shaw & Company in high-level jobs. DE Shaw is seen by many as a pioneer of the quantitative hedge fund business.
Other funds at Two Sigma did not perform quite as dramatically, but still posted great returns by most standards. The Two Sigma Absolute Return fund brought in net returns of 10.06 percent in 2014. Two Sigma Horizon fund netted 14.43 percent last year, nothing to be ashamed of.
In general it was a slow year for hedge funds, but not for everyone. Chicago-based Citadel was able to take what was a challenging year for most funds and turn it into a year of excellent growth. Citadel’s equity hedge fund realized over 23 percent returns, while their multi-strategy flagship funds, Kensington and Wellington had close to 18 percent growth.
Although these returns are smaller than many previous years for Citadel, compared to the average hedge fund return these numbers are quite good. According to the HFR index, which is a composite of many hedge funds, the average return for a fund in 2014 was only 3.6 percent. Even the S&P 500 had significantly better returns, up 11.4 percent.
Other funds that out-performed the average were Pershing Square Capital, run by Bill Ackman, and Point 72, managed by Steve Cohen. Pershing realized 40 percent growth last year, while Cohen’s fund earned a cool $3 billion, which is a return of 10 percent.
Cohen was forced to create Point 72 from the remains of SAC Capital, a traditional rival of Citadel. SAC had to transform itself when it was forced to return all its public investments and modify its structure in 2014 in response to an insider-trading settlement.
Citadel manages $23 billion today, a great recovery after the trials of 2008 when it lost billions of dollars and came close to declaring bankruptcy.
The oldest fund among Paul Tudor Jones’ family of funds will be closed due to the cost of running the fund compared to its size, said an unnamed source who is acquainted with the issue.
The fund, Tudor Futures Fund, with an AUM of $300 million will be closing up shop. The fund has posted gains every year since its inception. Last year another one of the Tudor funds, a computer-driven managed fund, also closed after three straight years of posting losses. That fund was worth $1.1 billion at its peak.
Jones is one of the most successful hedge fund managers, boasting an average annualized gain of 19 percent for his flagship fund, Tudor BVI Global. Tudor began in Greenwich, Connecticut with an eye to trading across credit, currencies, stocks and commodities. Today the Tudor Investment Corp hedge fund firm that Jones runs is valued at $13 billion.
With only a few days left of 2014 we thought now is a good time to look back and see what predictions did not work out quite so well for some major hedge fund managers.
General Motors is a well-liked holding which is popular as a component of hedge funds. Unfortunately it seems for many funds betting on GM, including the mega-car manufacturer in the fund soup was not a good choice. The stock fell 17% year to date. Recalls and accident fatalities definitely put pressure on the company.
Bill Ackman’s Pershing Square fund bet against Herbalife, and now Ackman is one of the few reaping benefits from that food supplement company. Year to date Herbalife has shed more than 50% of its share price.
Amazon is not doing so well so far this year, losing 23% of its stock’s value. This online mega store used to be the darling of many hedge funds; the company was dropped like a hot potato this year by Goldman Sachs Group’s VIP list in the third quarter.
According to a new study, women who work as investment banking analysts lag behind their male colleagues when it comes to breaking into the world of hedge fund management. The research was done by the recruiting firm Vettery, and looked at 1,394 analysts; males making up 76 percent of the pool, and women 24 percent.
After tracking the career paths of all the analysts in the study, Vettery found that men made up 88 percent of those that got hedge fund jobs. Men also fared better in other “buy-side” finance jobs, such as private equity. The study showed that 84 percent of analysts who went on to private equity jobs were men, while only 16 percent were women.
Women did do better in other areas, however. They had a stronger representation in the “sell-side” of finance after two years. Women took up about 31 percent of bank jobs compared to 69 percent for men.
Alex Orn, director of analytics at Vettery partially explained the results as a consequence of self-selection by women. He believes that women may be more interested in a larger variety of roles after banking. They may venture forth more frequently into technology start-ups, business development and strategy, and business school.
“We see a lot more males actually interested in hedge funds, but regardless of that, it’s extremely difficult for both males and females,” he said.
In a letter by the President and Managing Director of the Element Capital Group, Francisco D’Agostino states that “The financial crisis from which we are still recovering has taught investors…that investing is risky.”
Element Capital Advisors Ltd., is an independent investment advisor with their headquarters in the British Virgin Islands with branch offices in Caracas, Venezuela and Panama City, Panama. The top priority strategy of the firm is to bring to their clients excellent returns but with minimal volatility. Element’s managers hope to achieve results that are not correlated with the behavior of major market indices. The major goal of the company is to preserve capital and liquidity.
With this background on the firm, it is not surprising that Francisco D’Agostino states in his letter that, “…we at Element are constantly navigating the changing financial landscape in order to achieve investment results that are stable, non-correlated to the volatile markets providing an appropriate foundation for individual investors.”
Element’s Multi-Strategy Fund is an excellent example of how the firm delivers on its promise. During 2012 the fund delivered 3.23 percent while maintaining a low level of volatility, below 1.29 percent.
The company is also invested in external hedge fund managers. They are completely committed to their due diligence requirements, and are at the same time as adaptive and adaptable as possible. The firm is particularly pleased with their Latin American fixed income investments for which they take pride in their expertise due to their ties to the area.
November was a great month for computers and their handlers on Wall Street. In the past month especially, hedge funds that use computer programs to make trades demonstrated some of the best results in the industry.
One fund, Two Sigma, which is run by an academic from the world of artificial intelligence and a mathematics maven, had a 10 percent increase in value last month in one of its strategies, with overall upward movement for the year of 47 percent. Two Sigma is a $24 billion firm founded in 2001.
A second such firm, Cantab Capital Partners, headquartered in Cambridge, had an 18 percent return in November and 32 percent for the year. Aspect Capital, another UK-based technology-driven firm founded in 1997 with $4.8 billion AUM increased by 12 percent in November and doubled its return in 2014.
Engineers, scientists and mathematicians who are translating their specialized skills into predicting the markets are known as quantitative analysts. They design computer programs that search for price discrepancies across markets. This year, and especially in November, these technology-driven investment strategies took advantage of the crash in the price of oil and on government bonds that the human traders overlooked.
“Discretionary traders did not see value in buying and holding sovereign bonds in the U.S., U.K. and Germany,” which benefited quantitative funds, said Anthony Lawler, a money manager for GAM Holding, which invests in hedge funds. “Short energy was a large winning trade, whereas discretionary traders were by and large not in,” he said, referring to bets against the industry made by human decision-makers.
During the week which ended on December 2 speculators increased their net-long positions in West Texas Intermediate crude by 14 percent. That increase was the largest in 20 months, according to the US Commodity Futures Trading Commission. Short bets on oil shrank by 15 percent and long bets went up by 4 percent.
The crash in the price of oil was exacerbated by the decision of the 12-country OPEC group to continue at the present level of oil output, which brought into focus more clearly the price-war in crude. Oil began its steep decline in October last year, and reached a five-year price-low last week. Adding to oil’s woes was a US boom in shale production which added to the global glut coming at the same time as a weakening in the growth of demand for oil.
“A lot of people are betting that the selloff is overdone,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund (USO) that focuses on energy. “We haven’t seen these levels in years. They represent extreme value to some folks.”
WTI was going for $66.88 per barrel on the New York Mercantile Exchange during the period covered by the CFTC report. The global benchmark, Brent crude, was $68.26 a barrel. The price floor is now at about $60 or less, according to companies such as Deutsche Bank AG, BNP Paribas SA, and Petromatrix GmbH.