The famous quant hedge fund, Hutchin Hill, had moderate returns in the third quarter. The big news for the hedge fund, whose total assets were just above $1 billion by the end of October, is that its integral investor, Renaissance Technologies’ Meritage Fund, locked $200 million for the next two years with the fund. Meritage is one of the earliest investors of Hutchin Hill.
Hutchin Hill’s Capital Master Fund returned 2.43 percent in the third quarter, and is up 3.26 percent for the year, according to a letter obtained by ValueWalk. Additionally, the Capital Master Fund was up 4.22 percent in October, this marks a large gain and takes the YTD returns to +7.62 percent. The Liquid Credit Master Fund, launched in July 2012, was up 1.26 percent for October and returned 4.84 percent for the year.
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In September, the fund was down by 0.57 percent, strategies that detracted performance were Opportunities, Events, Managed futures, and quantitative approach. Hutchin Hill’s portfolio is equally distributed in the long short strategies. It profited from its short positions on equities that include banks, exchanges, and brokers. The fund is also gaining from its major long position in a credit card company after a positive earnings report in the third quarter. Like the second quarter, HH’s long positions remain in large cap banks, mortgage companies, and credit card companies. The fund is hopeful about the prospects in the healthcare sector, and expects positive turns from the acquisition of assets by pharmaceutical companies.
In its long/short corporate strategy, HH missed on profits that were expected from shorts in corporate bonds, after ECB’s aggressive bond buying program was announced. Hutchin Hill had gained huge profits from the LIBOR scandal previously and did not anticipate the tailwinds from Draghi’s new policy to improve the demand of corporate bonds.
In its credit based strategies, the fund lost in its positions in autos, technology, and euro exchange, and gained from mortgage insurance and investment grade, and high yield financials and credit swaps positions in Italy and Spain.
The fund is profiting from the rounds of quantitative easing from the Fed and ECB, and is therefore inclined towards companies that will profit from a favorable economic environment that springs from new monetary policies. The fund expects IG bonds to gain the most from the Fed’s plan of buying MBS after investors sell their exposure in mortgage, the yield on IG bonds will improve because of subsequent high demand. Like many other investors, HH’s managers think that IT companies that are significantly invested in the PC and printer business are likely to incur losses.