Kleinheinz and Mariner Hyman Lose on Euro Bets

Kleinheinz and Mariner Hyman Lose on Euro Bets

Hedge funds have been stacking up on their shorts on the euro since 2010, when they made their biggest bets on this currency in history. Bank of America’s hedge fund monitor has been reporting how hedge funds were covering their shorts on the euro since before August of this year. In October, the hedge funds had finally moved out of their crowded short position on the euro, according to BAC’s research. So how well did these investments do for a couple of the medium and large sized funds?

KCP or Kleinheinz Capital Partners detracted in the third quarter by 1.85 percent, while the monthly returns for September were down by -1.18 percent. It is worth mentioning that KCP under-performed in 2011 and was down over 27 percent in the last year. KCP’s returns in the second quarter was also less than desirable. KCP lost on its short bets on euro and JPY, and also suffered from the rounds of monetary easing by ECB and Federal Reserve that have made risky assets more attractive in the present economic picture.  The fund reduced its position in German bonds, an investment that it actively pursued in second quarter. KCP’s largest positions are in Apple Inc. (NASDAQ:AAPL), Monsanto Company (NYSE:MON), China Mobile Ltd. (NYSE:CHL), LUKoil Holdings, Thai Union Frozen-R (PINK:TUFRF) and Ocwen Financial Corporation (NYSE:OCN), among others. The fund lost on its investment in China Mobile, but profited on other major stock holdings. KCP’s portfolio is largely based on a net long exposure that is hedged against shorts in real estate and energy companies.

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Mariner Hyman Beck Global Fund, with over $4 billion in assets, has had a very rough year so far. The fund is down by over 17 percent year to date. Throughout the year, the largest gain was seen in July (+3.7 percent). One of the reasons for this severe lack of returns are Mariner’s long positions in oil, where prices are suffering due to lackluster demand. The fund lost on its position on the euro, which fell in face of other currencies, because of the Spanish debt crisis, the currency sector was Mariner’s largest loser for the month of September. Interestingly the fund had gone long on euro after monetary easing from the ECB, but suffered losses in September, when markets lost confidence in the currency. Performance has declined in other industry sectors like bonds and commodities as well. Profits were gathered from longs on precious metals and shorts on cotton.