Sunday, 14 February 2016
Last updated 1 day ago
Jan 8 2008 | 1:14pm ET
Some of the biggest hedge funds in the world have been weighed in the balance of 2007, and found wanting.
Most indices show that the average hedge fund returned roughly 10% last year, a figure that some big names in the industry can only dream about, according to published reports. The biggest name of all, Goldman Sachs’ Global Alpha fund, suffered one of the largest declines of any hedge fund last year, losing 38% through Dec. 28. It is the second-straight losing year for the one-time Cadillac of hedge funds, which, like many of its quantitative peers, was severely burned by this summer’s subprime slide, and continued to be hurt by the credit crisis throughout the second half of the year.
It was hardly alone. According to Bloomberg News, seven of the 10 largest hedge fund managers trailed the industry average; six of those seven were quant managers.
A case in point is the quant offering from the world’s largest hedge fund manager, JPMorgan. Its Highbridge Capital Management unit saw its Statistical Opportunities Fund fall 14%. But the firm’s non-quant funds often performed extremely well, with its long/short equities offering up 40% and its Asian equities fund up 19%. The firm’s flagship returned a more modest 8.5%, while its event-driven and relative value fund dropped 10%.
Other funds glad to see the ball drop on New Years are Blue Sky Capital Management’s Japan Fund, which fell 31% last year, Odey Asset Management’s Japan & General Fund, which declined by 26%, Drake Capital Management’s flagship Global Opportunities Fund, which lost 23%, and GMN Capital, which lost 19%.
San Francisco-based GMN announced in November that it would close its doors and return its remaining assets to investors.
Goldman Sachs’ Global Equity Opportunities Fund, for which the firm led a $3 billion bailout in August, was down 30% through November, and Renaissance Technologies’ largest fund, Institutional Equities, fell by about 1% on the year.
Many hedge funds avoided the quants’ fate at the hands of the subprime market, and in fact profited from the experience, none more spectacularly than Paulson & Co. The New York firm boasts three funds with triple-digit returns in 2007, led by its Credit Opportunities Fund, with an awe-inspiring 589.9% return. The firm’s Credit Opportunities II and event-driven arbitrage funds didn’t do too badly, either, returning 351.8% and 100%, respectively. The firm’s merger arbitrage fund trailed all three, but still returned a handsome 52%.
Triple-digit performances were also turned in by San Francisco’s Passport Management, whose Global Master Fund returned 219%, New York-based Harbinger Capital Management, whose flagship added 118% while its Special Situations Fund returned 170%, and 788 Capital Management, whose China Fund rose 104% on the year.
The leaders of both Paulson and Harbinger profited handsomely for their efforts. According to Bloomberg Markets, Paulson’s John Paulson and Paolo Pellegrini split $2.7 billion in compensation during the first nine months of the year, while Harbinger’s Philip Falcone raked in $1.3 billion.
Other notable winners of 2007 include Gartmore, whose Tenro fund added 57%; Sandler Capital Management, which rose 53%; Odey’s European fund; which jumped 52%; Eton Park Capital Management, whose Master Fund returned 35%; Pequot Capital Management’s Core Global Strategies Fund, which also rose 35%; Quantitative Investment Management’s Quantitative Global Fund, which bucked the quant trend and returned 28.6%; MKP Capital Management’s MKP Partners, which added 27.7%; and Tremblant Capital’s flagship Tremblant Parters, which returned 22%.
Among industry titans, Citadel Investment Group’s flagship Kensington fund returned 30%, D.E. Shaw & Co.’s Oculus Fund rose 26% (its Composite Fund managed just 7.4%), and Atticus Capital’s European offering also rose 26%. Cerberus Capital Management’s International Fund was up 18%, Farallon Capital Management’s flagship rose 14.8%, SAC Capital Advisors’ International Fund added 13%, and Och-Ziff Capital Management’s OZ Master Fund returned 11.7%.
Two other high-profile names were not as lucky: 32 Capital, run by Barclays Global Investors, returned just 0.3%, while Old Lane, the hedge fund founded by new Citigroup CEO Vikram Pandit, added only 2.8% in 2007.