As the first quarter of the year ends, quarterly returns of hedge funds are pouring in. Let’s take a look at who performed the best in the first three months of 2014.
Among credit focused funds, Bluecrest Multistrategy Credit Fund gained 5.5% in the first quarter, the fund manages $1.7 billion. Paulson Credit Opportunities was up 5.7% in Q1. Canyon Balanced Fund was up 4.4% in the first quarter whereas Hutchin Hill Diversified Alpha was up 5.15%.
Mortgage hedge funds are staging a comeback?
In the credit category, one of the biggest gainers were seen in funds focusing on mortgage backed investments. Leading the pack was Josh Birnbaum’s Tilden Park Offshore Investment Fund. Tilden Park, which specializes in securitized credit investments, bagged a decent 2013 with +20% return. This time again, Birnbaum netted one of the highest returns in the credit category, Tilden Park was up 6.7% through the end of March.
Tilden Park’s competitor Pine River produced a +3.5% return over the same period. Pine River Fixed Income Fund also focuses on mortgage backed securities in its $3.5 billion portfolio.
Hedge funds looking to non-performing loans
It seems hedge funds are looking at non-performing loans to make a comeback this year, after a rather quiet 2013. Banks could be anxious to unload these soured home loans as regulatory pressure makes it expensive for them to keep holding them. These were the views expressed by two mortgage focused managers, One William Street Capital and Ellington Management, while they spoke to Bloomberg. Michael Varnos, CEO of Ellington, was quoted as saying,
“The supply of NPLs (non-performing loans) is going to be very substantial for the next several years. Until last year, with the heavy supply of distressed securities, but only light supply of NPLs, we saw much better value in securities.”
One William Street Capital Fund was up 2.9% in the first quarter. Ellington Management scored a decent return in most of its funds in Q1. The portfolio focuses on mortgage-backed bonds. Ellington Mortgage Opportunities Master Fund was up 4.53% whereas Ellington Credit Opportunities gained 3.2% in the same period.
Winning hedge funds, Pershing Square, York Capital
To everyone’s surprise, Bill Ackman’s Pershing Square is leading the category with a +11% return in the first quarter. Other than Ackman, there are very few bigwigs who had a good quarter this time. Larry Robbins’ Glenview Capital and Nelson Peltz’ Trian Partners are just getting by with a +2.96% and a +1.3% return; both were big winners last year. After enjoying a rather spectacular 2013 and a great start to 2014, John Paulson had a terrible March. Paulson Advantage and Advantage Plus slipped 6.2% and 7.3% in the last month, slashing YTD returns to +2.6% and 4.9% respectively.
Doing much better than his competitors is James Dinan’s York Capital. The York Investment Ltd has gained 6.1% in the first quarter, and the fund’s assets are now up to $3.4 billion. John Burbank’s smaller portfolio, Passport Special Opportunities Fund has gained 12.5% in the first quarter. However Passport Global Strategy is up 3.8% in the same period.
Ivory Capital’s Ivory Optimal Fund gained 5.8% in its $1 billion portfolio.
Overall, strategies focused in Europe had a much better run whereas Asia and emerging markets were severely punished in the last quarter. We will have more on that later, stay tuned.
The returns mentioned in this post are from HSBC Hedge Weekly