Most hedge funds rode last month’s equity market rally to a happy place. At least one, caught with too many short positions, did not.
Galleon Group’s Galleon Captain’s Offshore Fund fell 9.6% in September. The fund, which is down more than 20% year-to-date, actually started the month market neutral. But as the market rallied, fund manager Todd Deutsch bet that rally would not go as far as it did, and increased its short positions, according to a letter to investors obtained by MarketWatch.
“As we brought down exposure, we see in hindsight that we sold our winners too quickly, hoping to reposition, and left the portfolio even more short-biased,” the firm wrote in the update, sent to investors this week. Still, the firm is not giving up on the $800 million strategy, which returned 44% last year.
“Our decision to stay the course is based on the manager’s high conviction regarding the portfolio and our belief that his style of value investing will be rewarded.”
Clients of other Galleon funds will not have to wait for their rewards.
The $6 billion firm’s Technology Offshore Fund added 3% last month, and is up 18% year-to-date, while its Diversified Fund returned a more modest 1% in September, and 8% year-to-date. But its top performer is the brand-new Health Sciences Fund, which enjoyed a 7% return in just its second month of trading.