Friday, 31 October 2014
Last updated 12 hours ago
Jan 3 2014 | 3:11pm ET
History will show that 2013 was an extremely disappointing year for hedge funds, with the average manager struggling to achieve even one-third the return of soaring stock markets. But a number of prominent managers will remember last year very differently.
Appaloosa Management returned 42% and Owl Creek Asset Management 48%, to name just two of the hedge funds to top the Standard & Poor's 500 Index's nearly 30% rise last year. Tudor Investment Corp. didn't do as well overall, but it earned more than 100% shorting gold in 2013.
The $14 billion hedge fund's bearish play on the precious metal was championed by senior trader Chris Tuohy, who turned less than $10 million in gold put options into more than $100 million, The Wall Street Journal reports. Tudor made further gains on gold from founder Paul Tudor Jones' own smaller short against the metal.
Tuohy has since exited his gold short, missing out on its further fall towards the end of the year. Gold lost 28% in 2013, its first annual loss in more than a decade.
Bearish bets weren't the only winners in 2013: Appaloosa's long options on stocks paid off handsomely, and Paulson & Co.'s $2.7 billion Recovery Fund rose 55% through November on bullish stock bets. Jericho Capital Partners earned 33% through November after boosting its exposure to stocks.
Owl Creek's impressive return stemmed from its bet that the new Japanese government, led by Prime Minister Shinzo Abe, would employ aggressive new monetary policies to boost its flagging economy.
Merk Investments' 5.8% return may seem downright pedestrian compared not just to last year's big winners, but also to the average hedge fund. But the Palo Alto, Calif.-based first made its money in currencies, which battered most players in 2013—the average currency fund fell nearly 5% last year.
Merk's founder and namesake, Axel Merk, bet heavily on the euro, which most investors expected to fall. Instead, it rose as fears about a eurozone collapse faded.
Sep 22 2014 | 4:15pm ET
"I tell people that everybody likes good news and so if you have good performance that’s wonderful,” explains Mike McKitish of Peddie School's endowment, “but it’s the people that want to talk about the bad news or where they drifted and how they came back and how they stayed to their discipline…” that he wants to hear from. Read more…
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