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Bloomberg Brief: Hedge Funds ACTIVIST

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Bloomberg Brief: Hedge Funds ACTIVIST Tuesday July 19, 2016 www.bloombergbriefs.com Context Looks to Hedge Fund Managers Post-Brexit NUMBER OF THE WEEK BY MELISSA KARSH $101.8 Billion — Amount funds of Context Asset Management is looking to add three hedge fund managers in the next hedge funds lost in the 12 months 12 to 18 months to its liquid alternative mutual fund platform because alternatives may through March because of outflows and see increased demand following the U.K.’s decision to exit the European Union, poor performance, according to a report according to President and Chief Investment Officer John Culbertson. from eVestment. The Bala Cynwyd, Pennsylvania-based firm plans to create three liquid alternative mutual funds and hire the hedge fund managers to serve as subadvisers, said Ron INSIDE Biscardi, CEO of its parent company, Context Capital Partners. Context Capital Partners, which has previously seeded five hedge funds, will help seed the new funds, Incline Investment's Tahoe Fund rose with initial investments typically ranging from $20 million to $30 million, Biscardi said. more than 9 percent in June: Returns "Brexit is confirming our bias toward those strategies that we really like," including systematic quants, hedged equity, quant equity and volatility strategies, Culbertson said SoMa Equity Partners is said to close in a telephone interview last month. "What we’re not doing is going back toward early the founder's class of its flagship fund on business-cycle strategies, which are pro-growth, high-beta strategies." Sept. 1: Milestones The firm, which currently runs one liquid alternative mutual fund — the $93.5 million Context Macro Opportunities Fund — is now "more aggressively" looking to partner with Tremblant hires former FrontPoint managers that offer a low correlation to risk assets, provide high efficiency ratios and executive Daniel Waters as co- asymmetric returns, Culberston said. "Because of Brexit, we believe there’s an president: On the Move opportunity for those types of strategies to perform very well, and for our investors to be attracted to them," he said. Newbrook goes long Dave & Busters, Hedge fund managers have been looking to liquid alternative funds to attract new shorts Goodyear. Perella Weinberg’s clients as money coming into hedge funds plateaus, Robert Christian of Franklin Vassalou says weak banks amplify Templeton’s K2 Advisors, which invests in hedge funds, said in an interview last Brexit risk: Market Calls month. Eighty-four percent of hedge fund investors withdrew money in the first half of the year, citing underpofrming funds as the main driver, according to a Credit Suisse EU regulator backs overseas-fund Group AG study released last week, and a net $15 billion was pulled from hedge funds access with new AIFMD passport advice. in the first quarter, the most since 2009, Hedge Fund Research Inc. found. ValueAct to pay $11 million to the U.S. "We’re in a market where we believe you need to be more defensive than offensive over its Halliburton stake: Regulatory and alternatives are better suited for that kind of positioning than your mainstream product," Biscardi said in a separate interview. "We’d absolutely lean more toward hiring Gramercy Funds Management's Peru a hedge fund manager as a subadviser because they have alternatives experience, bond fight is now playing in a theater versus a classic mutual fund portfolio manager." near you: Over the Hedge Paamco may increase its exposure to Funds of Hedge Funds Retreat to Under $850 Billion in Q1 long-short equity funds post-Brexit, according to managing director Alper Ince: Spotlight QUOTE OF THE WEEK “Organizations and investors don't like to pay 2-and-20 when funds are not making money. ... The big investors are forcing that change and they will continue to do that by starting to pull money. You don’t get any more money if you don’t change.” Funds of hedge funds assets fell to $841.6 billion at the end of the first quarter. — Nomura Holdings Inc.'s Christopher Antonelli — Hema Parmar RETURNS IN BRIEF FOR QUESTIONS, E-MAIL [email protected] July 19, 2016 Bloomberg Brief Hedge Funds 2 RETURNS IN BRIEF FOR QUESTIONS, E-MAIL [email protected] Mooring Capital Fund, the $60 million June Returns hedge fund that invests in distressed and sub-performing commercial loans, gained about 15 percent in the second quarter, bringing returns for the year to roughly 19.9 percent, said Chief Executive John Jacquemin. The fund purchases commercial loans from banks and other financial institutions and then works with borrowers to restructure and modify the mortgages, according to a document obtained by Bloomberg. The second- quarter return was boosted by the sale of an industrial park in Las Vegas, which the fund was invested in, to electric car company Faraday Future, Jacquemin said. "We were recipients of 41 percent of the benefits," he said in an interview. "We didn’t anticipate we would sell the land one year after we bought the rights to it." On July 1, the firm bought shares in iShares UK Property UCITS ETF and on Year-to-Date Returns to End-June July 7 it bought shares of U.K.-based homebuilder Redrow Plc, which had fallen more than 31 percent since June 23, to take advantage of market "overreaction" following the U.K.’s vote to leave the European Union, Jacquemin said. "Our view is the London real estate market is over-appreciated, but non- London-based real estate markets are attractive. Most of Redrow’s construction is outside of London," he said. The fund is run by Virginia-based Mooring Financial Corp., which manages $110 million in assets. Highwood Capital LLC, the New York- based fund of hedge funds, gained 0.3 percent last month, which is also its return for the year through June, said a person familiar with the matter. Hedge Fund Research’s HFRI Fund of Funds Funds not mentioned in the text on this page were previously reported in the Brief or on BN. Composite Index fell 0.3 percent last month and 2.4 percent this year through The fund’s returns were boosted by long FTSE 100 is one of the strongest stock June. Highwood "has continued to positions in bonds across Asia, Europe markets in the world," the letter said. outperform the markets with significantly and the U.S., as government bonds "Whether it turns into a sustained uptrend less risk by properly allocating funds extended their gains last month after the is anyone’s guess, and either way we will across uncorrelated strategies of well- U.K’s Brexit vote, the letter said. "We stick to our discipline." established hedge fund managers," were already following the long-term — Hema Parmar Robert Banker, founder and managing trends in a number of markets pre-Brexit. Seth Klarman’s $28 billion hedge fund partner, said via e-mail. The fund rose So when Brexit hit, the systems were rose about 1.25 percent in June, bringing 4.6 percent in 2015, the person said. able to capture the significant moves," its gain this year to about 4 percent, said Incline Investment Management, the CEO Ted Parkhill said in an interview. a person with knowledge of the firm. Incline Village, Nevada-based systematic The largest bets were in commodities Baupost has seen some energy bets hedge fund, gained 9.5 percent in June and fixed income. The portfolio was short rebound after they dragged on 2015 in its Tahoe Fund, bringing returns for the the British pound, and long the U.K.’s performance. Diana DeSocio, a Baupost year to 9.6 percent, according to an FTSE 100 Index. "Following the Brexit spokeswoman, declined to comment. vote, the investor letter obtained by Bloomberg. — Sabrina Willmer MILESTONES July 19, 2016 Bloomberg Brief Hedge Funds 3 MILESTONES SoMa Equity Said to Close Founder's Class Sept. 1 Perry Alumnus Said to Raise SoMa Equity Partners, the technology-focused hedge fund started by former Apex $1.3B for Fund Capital Chief Investment Officer Gil Simon, is planning to close the founder’s share Asia Research & Capital class of its flagship fund on Sept. 1, according to a person familiar with the matter. Management, started by Perry Capital’s The founder’s share class carries a 1 percent management fee and a 15 percent former Asia head Alp Ercil, has raised performance fee, the person said. $1.3 billion for its third fund, which The fund, which started in May, had almost $80 million in assets as of July 1 with invests in distressed assets globally with another roughly $90 million in commitments planned over the next six months, the a focus on Asia, said a person with person said. It has returned about 6.9 percent since May 1, according to a performance knowledge of the matter. document obtained by Bloomberg. Ercil’s Hong Kong-based company The fund was up 2.6 percent in June, with long positions in LinkedIn Corp. and Yelp completed capital raising for the ARCM Inc. being the largest performance contributors, Simon wrote in a July 12 investor letter Master Fund III last week, said the seen by Bloomberg. He said in the letter that the LinkedIn bet is an example of the firm's person. The new five-year pool, its focus on "high quality, growth companies when the market is distracted by short-term largest, will primarily invest in publicly concerns." traded and private credit, the person On Aug. 1, SoMa will start an offshore version of its onshore vehicle, the person said. added. Yusuf Haque, ARCM’s head of Simon, who joined Apex in 2006 and became CIO in 2015, started the San Francisco- business development, declined to based fundamental long-short equity fund manager with seven former Apex employees.
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