- Jim Simons’ Renaissance Technologies, Bill Ackman’s Pershing Square, and the “black swan” fund Universa Investments posted big gains during the recent coronavirus sell-off.
- They bucked the industry trend, as more than seven in 10 hedge funds suffered losses in March, Bloomberg estimated.
- Here are six funds that scored big wins during the market meltdown.
- Visit Business Insider’s homepage for more stories.
Renaissance Technologies is a quantitative hedge fund founded by Cold War code-breaker and math professor Jim Simons.
Its flagship Medallion fund posted a 39% return before fees this year through April 14, The Wall Street Journal reported. Moreover, it scored a 9.9% gain after fees in March, when the S&P 500 hit a three-year low.
Medallion has gained an average of 39% annually, after fees, since 1988, The Journal said. Its strategy of betting on how equities will move in relation to each other helped it generate some of its biggest gains during the dot-com crash in 2000 and the 2008 financial crisis.
Bill Ackman, the billionaire boss of Pershing Square, recognized the coronavirus threat early and hedged his portfolio against a market downturn.
Ackman spent $27 million on credit-default swaps, a form of insurance against assets defaulting. Those mushroomed in value to $2.6 billion after the pandemic’s spread boosted the odds of corporate defaults.
The $2.6 billion gain offset losses in Pershing’s equity portfolio, and allowed Ackman to capitalize on cheaper valuations and bolster his stakes in companies such as Hilton and Warren Buffett’s Berkshire Hathaway.
Pershing posted an 11.1% net gain in March, underpinning a 3.3% net gain in the first quarter.
Universa is a “black swan” fund that specializes in profiting from market shocks. It prepares for extreme swings by buying “out-of-the-money” options that pay off if prices move dramatically.
Its boss is Mark Spitznagel, a protégé of Nassim Taleb, the author of “The Black Swan: The Impact of the Highly Improbable.”
Spitznagel worked at Taleb’s former fund, Empirica Capital, and Taleb serves as Universa’s scientific adviser.
Read more: An expert at Boyar Research lays out the Warren Buffett-inspired investing approach that’s helped the firm crush the market for 7 years — and offers 4 stock picks for a coronavirus-battered market
Crescat Capital posted gains of 40.5% and 34.5% in two of its key funds between February 20 and March 20, after betting on a stock-market slump for more than two years.
“This is just The Big Short again,” Tavi Costa, a portfolio manager at the hedge fund, told Ozy.
Crescat’s chief, Kevin Smith, kept half of the fund’s assets in cash and invested in gold and silver in anticipation of a market downturn, Ozy reported.
Smith grew up reading Warren Buffett’s shareholder letters, and told Ozy that he located his fund in Denver for the same reason that Buffett is based in Omaha — to avoid succumbing to “groupthink.”
LongTail Alpha, a California hedge fund run by former Pimco manager Vineer Bhansali, scored a 400% return in the first quarter, The Wall Street Journal reported.
The fund invested in stock and bond markets earlier this year, positioning itself to profit from a spike in volatility, The Journal reported. As a result, two of its flagship funds cashed in during the market meltdown.
The OneTail Hedgehog Fund II posted a 156% return in March, fueling a 400% return for the first three months of the year, The Journal said, citing client letters.
The TwoTail Alpha Fund made a respectable 65% gain last month as well.
Ruffer aka “50 Cent”
Ruffer, a London-based investment fund nicknamed “50 Cent,” made $2.6 billion from hedges during the coronavirus sell-off.
The fund invested in derivatives tracking the VIX volatility index, which is often called Wall Street’s “fear gauge.” It also bought credit derivatives, S&P 500 and Euro Stoxx 50 put options, and gold hedges.
Ruffer’s $2.6 billion gain offset losses elsewhere, meaning its flagship fund slid less than 1% last quarter.
The fund gained its nickname after it made a killing in February 2018 by buying VIX derivatives for 50 cents each.
Odey Asset Management
Odey Asset Management, helmed by Crispin Odey, posted gains across several of its funds during the market downturn.
The equities-focused Swan fund, which Odey runs himself, scored an almost 20% return in March and an 8.3% gain for the first quarter, the Financial Times reported.
The Odyssey fund, which bets on broader market trends, managed a nearly 16% return last month and a first-quarter performance of 27.4%, the newspaper said.
Odey’s European fund, one of his flagship strategies, registered a 21% gain in March and a 6.5% gain for the first quarter, the Financial Times said.
7 hedge funds that scored big gains during the market meltdown