Having a low correlation to S&P 500 should have paid off in the last two months as all major stock markets took a dip for the worse. This seems to be true for Balyasny Asset Management, which underperformed in its flagship Atlas Global fund in Q1. In the second quarter Atlas Global managed to spin a gain of +2.34%, much better than the -0.29% it managed in 1Q2012. Atlas Global has gained 0.3% in June. The firms assets are down from $3.7 billion at the end of Q1 to $3.34 billion in Q2.
New Balyasny CFO, former SAC Capital Exec
BAM’s funds have maintained an extremely low correlation to S&P, at about +0.04 since inception. The funds also has little correlation to the HFRI Equity Hedge Index at 0.19. Balyasny welcomed Robert Aurigema as its new CFO. Aurigema has previously worked at SECOR Asset Management, Plural Investments, S.A.C Capital Advisors and Goldman Sachs Group Inc (NYSE:GS). The other team update for the firm is that COO Patrick Prill will be retirirng in 2014.
For Dmitry Balyasny’s BAM, these are one of the good times, as uncorrelated long/equity strategy has started to work out better now. The flagship fund has already gained 1.82% through July 19, so likely better times ahead. In the past quarter, the fund took gains in its macro plays and also in industrial, financial and energy equities. BAM detracted in utilities, REITs, healthcare and event driven strategies.
Balyasny’s market outlook
On dynamics Balyasny is looking at in the coming months, the managers believe that profits from equities have been generated by multiple expansion rather than earnings growth. This will become an even bigger mover of returns as markets experience increased volatility and higher interest rates.
Balyasny has the largest exposure in equities, which takes 87% of the total assets under management. In these markets the fund is already seeing improvement in its long alpha hit rates which wereat 56% in Q2 whereas short alpha hit rate came at 48%. BAM is positioned to profit from increased flows into equity markets as investors exit their bond holdings. The fund is focusing on more opportunities on the short side, as stock markets shake out inflated gains.
Dmitry Balyasny notes the divergent themes in global macro scene, as China and the U.S. move to stringent fiscal policy whereas Europe and Japan are pumping in further stimulus. Balyasny is focusing on the weakening growth in China, Japanese reflation, Emerging markets and changing volatility in global markets.
The fund has reduced exposure in long term bond holdings and has protected its portfolio against changing interest rates.