Hedge Fund Heat Moves To Ackman While Dalio Freezes

(Business Insider) Big names closed shop. Billions were pulled out of the industry. Fees continued to drop. 

But 2019 wasn't all bad for hedge-fund managers. 

Once embattled stock pickers like Bill Ackman and David Einhorn had bounce-back years, with Ackman posting record returns.

Activists like Third Point, Elliott, and Starboard Value saw big campaigns go their way. And Steve Cohen's first full year of trading after his ban from regulators beat several rivals — and the billionaire is set to buy his favorite baseball team. 

That said, there were funds that slipped and stumbled. Short sellers were pressed again as the market surged. Ray Dalio stumbled for the first time in years, and Pimco's flagship hedge-fund offering lost money. 

Hot: Stock pickers that bounced back

Pershing Square, with returns topping 50% for the year, was one of the big winners of 2019, as founder and billionaire Ackman returned the firm to its roots.

With a portfolio that includes only long positions, Ackman is avoiding the drawn-out activist battles that landed him and the firm in trouble during his campaign against Herbalife. 

Einhorn's Greenlight Capital, on the other hand, is not shying away from a fight with one of the most famous CEOs and companies. Notching double-digit returns a year after he lost more than 34%, Einhorn has continued his campaign against Elon Musk and Tesla, culminating in a presentation at the Sohn Investment Conference over the summer, which played a stream of promises by made by Musk. 

While Greenlight's returns surely made investors happy, Musk has so far been unaffected by Einhorn's campaign, as Tesla's stock has shot to more than $440 a share. 

Not: Dalio leads the big names who struggled

Dalio lost money and one of his top executives in 2019.

The billionaire founder of Bridgewater Associates is losing his firm's co-CEO Eileen Murray in the first quarter of this year, and his firm's flagship fund lost 2% through November, trailing rivals like Paul Tudor Jones. 

Meanwhile, Pimco's flagship hedge fund, the $3 billion Global Credit Opportunity fund, fell by double digits through October last year. 

There were big closures as well, like Louis Bacon's Moore Capital and David Tepper's Appaloosa. Another big name, Jeffrey Vinik, realized just how hard the industry is now. He closed his new firm after not being able to raise sufficient capital. 

Hot: Spin-offs from big funds making their own name

D.E. Shaw is one of the most famous and successful hedge funds in history. Ken Griffin's Citadel has been so successful that he was able to buy the most expensive apartment sold in US history, and he's not even using it as his main residence. And O. Andreas Halvorsen's Viking Global Investors has an argument for the top Tiger Cub, though funds like Coatue, Tiger Global, and Lone Pine might disagree. 

But in 2019, some of the funds making the most noise were run by alumni of these industry giants. 

Brendan Haley's Holocene Advisors, for example, has pulled in billions of assets since he launched in 2017 after serving as Griffin's equity head. Parvinder Thiara's Athanor Capital is one of the most talked-about new macro shops out there, and he was selected by the Sohn Investment Committee as a rising star.

D1 Capital, started by Viking's former Chief Investment Officer Daniel Sundheim, has surged thanks to a bullish view on Netflix. Sundheim's shop has nearly doubled its assets — from $4 billion to more than $7 billion — in a year and a half. 

Alumni from these shops, particularly Citadel and Viking, have the potential to dominate headlines in 2020 as well. Ben Jacobs, who replaced Sundheim at Viking, is set to launch his Anomaly Capital later this year, while Citadel alumni like Jack Woodruff, Richard Schimel, Michael Rockefeller, and Karl Kroeker launched last year.

Not: One notable exception

A spin-off and protégé of Ackman, Mick McGuire is getting out of the game after a disastrous 2019.

McGuire's Marcato Capital, which made waves when it led an activist campaign against Buffalo Wild Wings, is planning to return capital to investors after a multiyear run of poor performance. 

After nearly a decade, Marcato is closing. 

Hot: Big-name activists taking on big-name companies

Marcato Capital notwithstanding, 2019 was a good year for activists. 

Dan Loeb's Third Point notched returns of 14.6%, driven by the firm's big stake in Sony, which has battled the firm over the future of the company. Elliott Management has found a receptive audience to its campaign against AT&T, as company executives moved quickly to meet demands from Jesse Cohn.  

Starboard Value's investment into Papa John's has also paid off as the stock has soared by more than 50% since the activist fund decided to invest in the pizza chain. This, of course, has not stopped John Schnatter, the chain's founder, from saying the firm changed the recipe. 

Medium: Short sellers in a surging market

To break even as a short seller when the market breaks records is impressive enough, but the double-digit return for Carson Block's Muddy Waters Capital in 2019 did even more. 

Block is expanding his firm and moving it to New York, picking up a bigger media profile on the way there with his faux awards show, the Fidouchies. 

But Block was the exception for short sellers in 2019. One of the most popular companies to short, Tesla, soared, costing investors $2.9 billion. Russell Clark's Horseman dropped 35% and is closing its European fund.

Hot: Cohen is back

Cohen's ban from managing outside money was lifted about two years ago now, but 2019 was the first full calendar year for Point72 to trade with investor capital.

The firm didn't disappoint, besting several multistrategy rivals with returns of about 13% through the end of November.

The bigger news for Cohen came later in the year, when it was announced he would buy his favorite baseball team, the New York Mets. While David Tepper stepped away from the hedge-fund game to focus on his football team, Cohen told investors the purchase wouldn't distract from his true focus, investing. 

Hedge-fund and private-equity managers that both own a sports franchise and continue to run their firms include Avenue Capital's Marc Lasry, who co-owns the Milwaukee Bucks, and Apollo's Josh Harris, who owns the Philadelphia 76ers. 


More Articles