Low profile hedge funds post high returns in year after
New York Sohn conference
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[April 23, 2018]
By David Randall and Svea Herbst-Bayliss
NEW YORK (Reuters) - One of the year's most
popular events for fund managers, the Sohn Investment Conference, will
be held in New York on Monday, but if history is any guide, some of the
industry's lower-profile managers will probably provide the most
The best ideas of some press-shy hedge fund managers who spoke at the
2017 New York Sohn Investment Conference outperformed those of celebrity
managers such as Greenlight Capital's David Einhorn, according to a
Josh Resnick, founder of New York-based Jericho Capital Asset
Management, had the best overall investment idea of the 11 featured
investors who spoke last year. His, short, or bet against, Frontier
Communications Corp <FTR.O> gained 61 percent since it was announced on
May 8 of last year.
Larry Robbins, the billionaire manager of Glenview Capital Management,
had the next-best performance, with approximately 33 percent gains in
his bullish position in DXC Technology Co <DXC.N>.
The 2018 Sohn conference, which will take place at the David Geffen Hall
at Lincoln Center, will include presentations by Glen Kacher of Light
Street, Chamath Palihapitiya of Social Capital and Li Ran of Half Sky
Returns from picks of higher-profile investors at Sohn last year were
mixed and Einhornís Greenlight is among those nursing heavy losses.
Einhorn, who came to fame after his call to short Lehman Brothers before
the 2008 financial crisis, last year recommended shorting Core
Laboratories NV <CLB.N>, a losing position as the stock gained 7.3
percent between May 8 and Thursday.
In the first quarter alone, Greenlight was down 14 percent, Einhorn
wrote in a letter to clients dated April 3. Through a spokesman,
Greenlight declined to comment for this story.
Hedge fund managers, unlike many mutual fund managers, can bet a stock
will fall and thus promise to make money in tumbling markets, but that
strategy has not worked well for a variety of managers this year even
though the U.S stock market has suffered from fears of central bank
interest rate rises and the fallout of the imposition of import tariffs
by President Trump.
Last year, Bill Ackman, a long-time supporter of the conference, pitched
real estate company Howard Hughes Corporation <HHC.N>, which heís owned
for some time. In 2017, the pick was a winner for his $8 billion
Pershing Square Capital Management but Ackman's firm still lost money.
The stock climbed 11 percent in the last 52 weeks. Ackman will not be
presenting this year.
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William 'Bill' Ackman, CEO and Portfolio Manager of Pershing Square
Capital Management, speaks during the Sohn Investment Conference in
New York City, U.S., May 8, 2017. REUTERS/Brendan McDermid
John Khoury, who runs $2.7 billion Long Pond Capital, will be back at
the Sohn conference this year after having pitched Hyatt Hotels Corp <H.N>
in 2016. In the last 52 weeks the stock price has climbed 42 percent.
As hedge fund returns have stalled in the past year, investors have
protested by pulling cash out. At the same time, some are giving smaller
fund managers a chance, given academic research that smaller firms often
outperform their bigger rivals.
"It's hard to attract money and run a long-short fund when the broad
market is going up 20 percent a year," said Ken Heinz, president of
hedge fund tracker Hedge Fund Research.
DoubleLine's Jeffrey Gundlach, known as the "Bond King," recommended going long
emerging market stocks and shorting the benchmark U.S. S&P 500 stock index and
enhancing the return through leverage. Including borrowing costs, the trade
returned over 13 percent through Thursday. "This is a good result and a great
risk-adjusted result given the low risk nature of pair trades," Gundlach told
Reuters. The broad S&P 500 index gained approximately 12.2 percent before
dividends over the same time.
Resnick, who presented last year's best performing idea, will not be among those
presenting. The firm released a March 12 public letter calling on VMWare Inc <VMW.N>
to end talks with Dell Technologies over a potential reverse merger, arguing
that it would "likely lead to a significant destruction of shareholder value."
Shares of VMWare are up 11.4 percent for the week after reports that Dell may be
close to walking away from talks amid concerns that the merger plan would prompt
in-demand employees to defect to rivals that were not saddled with Dell's legacy
(Reporting by David Randall and Svea Herbst-Bayliss; Editing by Jennifer Ablan
and Clive McKeef)
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