Maverick, Chilton Burned By Aug. Volatility; Bridgewater, Black Swans Flourish

Aug 12 2011 | 12:11pm ET

As the markets continue to sort themselves out at the end of a wild week, so too hedge funds after a brutal—or profitable—first third of August.

Many hedge funds have suffered the fate of the broader markets—the Standard & Poor's 500 Index is down about 9% this month—or worse. Maverick Capital Management is down 11% this month, The New York Times reports, as much as the most celebrated loser this month, Paulson & Co.

Pershing Square Capital Management has also seen big losses: The New York-based firm is down about 10% this year, mostly due to losses this month. And Chilton Investment Co.'s flagship hedge fund has shed 8.5% this month.

But there are plenty of big-name winners, as well. Bridgewater Associates has made about 5% over the past week, pushing its year-to-date gains above 20%. Caxton Associates has also done well, rising 2.6% through Tuesday, according to The Wall Street Journal.

But those modest gains look even more so compared to the huge returns put up by the hedge funds created for moments such as these: black-swan funds.

One such firm, London-based 36South Capital Advisors, has seen one fund soar almost 70% this month, according to the Times. Universa Investments, which counts The Black Swan author Nicholas Nassim Taleb among its advisors, is up 25% this year.

"The stock market is behaving as it should when it's this incredibly expensive, especially since it's been kept on life support for a while now by Dr. Frankenstein Bernanke," Universa's Mark Spitznagel told the Journal, referring to Federal Reserve Chairman Ben Bernanke.

"Our philosophy is more like a trapper," 36South's Jerry Haworth told the Times. "We set volatility traps and the market falls into them. We seem to have a windfall every time there is a systemic crisis."

But even smaller hedge funds not betting on systemic crises have done well: Nariman Point has returned 15%, Holden Asset Management 11% and Conquest Capital Group's flagship 10%.

Asian hedge funds have also performed strikingly well. Iridium Asset Management's Alpha Fund is up 6% through Aug. 10, Ballingal Investment Advisors' BIA Pacific Macro Fund is up 4% and  Riley Paterson Investment Managements' Asia Opportunities Fund is up 2%, Bloomberg News reports.

The year's biggest hedge fund launch, former Goldman Sachs proprietary trader Morgan Sze's Azentus Capital Management, had a rough go during the early part of August, losing 0.26% between July 29 and Aug. 5. But the US$2 billion firm has made it up this week and is back in the black for the month.

Other prominent Asia hedge funds also managed to, at the very least, not lose their shirts during August's first two weeks. Dymon Asia Capital's Asia Macro Fund is up 0.5% through yesterday. Canning Park Capital's CCP Asian Opportunities Fund lost just 0.3% during through Wednesday, while Janchor Partners, headed by former The Children's Investment Fund manager John Ho, saw its Pan Asia Fund fall by less than 1% last week.


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