Hutchin Hill Capital is a well known, hedge fund, primarily famous for profiting off JP Morgan’s Chase & Co. (NYSE:JPM) London Whale and Libor scandal. The Hutchin Hill Capital Master Fund is up 2.44% in August 2012. The fund was up 0.73 percent in July, and now, the year-to-date returns are +3.85%.
Changes in Capital Allocation
Hutchin Hill Capital invests in a few defined strategies that include, Long/Short Equity, Events, Credit, Systematic and Quantitative, Macro, Managed Futures, and Opportunistic strategies. The Master fund increased capital allocation in Quantitative strategy from 21 percent to 26 percent of total. The Quantitative approach focuses on missed pricing in exchange-traded funds, options, futures, bonds, swaps, and currencies. Another increase in exposure was in the Macro strategy, up from 4 percent of capital to 8 percent. Capital allocation was reduced in Credit, from 23 percent to 18 percent.
Best Performing Strategies
The Event-driven (+1.29 percent) and Systematic/Quantitative (+1 percent) were the best performing approaches. Quantitative has been Hutchin Hill’s consistent performer for the last three months now. Managed Futures and Opportunistic strategies were down -0.36 percent and -0.09 percent respectively, as of the end of August.
Long /Short Exposure
By Asset classes, Hutchin Hill’s Master Fund is (more or less) equally exposed in long/short investments in Equity, Credits, and Interest rates. While the fund is short on Currencies, Commodities, and Govt. debt on a net total basis.
Performance By Strategy in August
Contrary to the results in July, the Event driven strategy performed well in August, with the best returns year to date. The strategy took a break from the euro crisis, and was able to make profits through a merger in the car rental space. HH’s top holdings till last quarter were in Hertz Global Holdings, Inc. (NYSE:HTZ) and Dollar Thrifty Automotive Group, Inc. (NYSE:DTG). The two companies announced a merger in late August, with Hertz acquiring Dollar Thrifty. DTG jumped to $87 from $81 after the merger was announced. The acquisition resulted in profits for HH’s Master Fund, the fund has exited both positions. Going forward, HH has reduced exposure in companies with higher cyclical exposure.
The Quant strategy gave positive returns from the fund’s index arbitrage positions, which are longs in the US and Europe. With Europe gaining traction from the ECB’s announcement, HH established long positions in investment grade arbitrage.
In Equities , the Master Fund gained from mortgage services and longs in credit cards, and lost in shorts in online brokerage stocks. Profits were also made from Canadian banks, as they beat earnings estimates and increased dividend yields.