Hutchin Hill, another hedge fund that profited from the JPMorgan Chase & Co. (NYSE:JPM) London Whale fiasco, marked its fourth anniversary in the month of July this year. The Hutchin Hill Capital Master Hedge Fund’s Q2 reports a rise of 1.73 percent in returns on all fees, while the year to date returns for the first six months of fiscal 2012 was up 0.8 percent. HH gained 9.5 percent on the S&P index for the first half of the year. For the four years, 2008-2012, the fund gained a total of 35.21 percent on all returns, compared to a raise of 21.15 percent on S&P 500. The master fund now has $1.1 billion in assets under management (AUM). The fund exited the whale trade at the end of June. The fund is short one global bank, but does not disclose if it is JPMorgan Chase & Co. (NYSE:JPM).
Portfolio Highlights of Q2
The fund received maximum gains from its quantitative (Quant) portfolio i.e 2.63 percent, while opportunistic strategies returned 1.71 percent for the second quarter. The maximum losses were observed in equity, events, and managed futures. The highest capital allocation (till June) was in quant and credit strategies while the lowest is in macro and opportunistic.
Performance By Strategy in June
For information on the kind of investments encompassed by each strategy of Hutchin Hill, read our earlier post.
In the month of June, the fund was profitable in its opportunistic trades on equity index and credit positions, while losing on Forex and gold. The fund lost due to low bond yields in Germany, and on energy supplies in its managed futures strategy.
The systematic and quant strategy profited in June, on both its long and short trades. Same goes for the fund’s statistical arbitrage strategy. The fund also performed well in Europe, where it benefited from the reduction in market players.
The fund cashed on events with investments in a corrections facility, and a merger in which Hutchin Hill held shares in the buying company. Losses were incurred from crashed deals and buyouts in Europe and Canada.
The fund gained on investments in equities, but June was a difficult month for long/short equity investing. The fund made profits off the long side on mortgage servicing, retail broker, and micro-cap bank space, but suffered losses in the capital market stocks, small/midcap banks, and trust banks. Hutchin Hill de-risked capital in health services and sector oriented technology.
In macro strategies, the fund benefited from Emerging Market currencies which traded more strongly than the developed ones. The Mexican peso (MXN) also recovered.
The fund has been able to identify and cash in on a couple of lucrative trades every year since inception. While the earlier focus was reserved on equities, credit, and quantitative strategies, this year marked a shift in strategy, where the fund zeroed in on opportunistic trades. The Hutchin Hill master fund was able to gain 1.7 percent on such trades in the second quarter.
Like many other hedge funds, Hutchin Hill also believes that these are difficult times, where making calculated investments have become harder. On one side, the US is smoothing things out with more flexible regulatory policies, on the other, Europe is hit by a spell of instability and China is mid way between positive growth and a weakening economy.
The fund is also opening a London office in six months pending FSA approval, and launched its Liquid Credit Fund with an initial $100 million investment. Marc Lasry, CEO of Avenue Capital will be on the board of the credit fund.