The principle mover of the last quarter’s economic environment was the monetary policy announced by the central banks of US and Europe. Both entities created a transient environment in which equities rallied and the stock market experienced a good turn, while currencies depreciated. Hedge funds with significant exposure in US and Western European equities performed well in some holdings and lost in others.
Basswood Opportunity Fund, is an equity L/S fund of Basswood Capital Management. The total firm assets are close to $1 billion. In the September quarter the fund was up by 2.35 percent, while the YTD returns are +3.55 percent. The top long performers for the month of September were Citigroup Inc. (NYSE:C), Bank of America Corp (NYSE:BAC), Greenhill & Co., Inc. (NYSE:GHL), First American Corp (NYSE: FAF), and Morgan Stanley (NYSE:MS). Citigroup takes the highest percentage of the fund’s portfolio and is expected to turn more profits in the coming period.The detractors in the long portfolio were, Dana Holding Corporation (NYSE:DAN), Anixter International Inc. (NYSE:AXE), Community National Bank (New York) (OTC:CBNY), Ensco PLC (NYSE:ESV), Oshkosh Corporation (NYSE:OSK).
Philip Carret was an investor and founder of Pioneer Fund, one of the first mutual funds in the United States. Carret ran the mutual fund for 55 years, during which time an investment of $10,000 became $8 million. That suggests he achieved a compound annual return of nearly 13% for his investors. Q1 2021 hedge Read More
The leading gainers in the short portfolio in September were, Clarcor Inc. (NYSE:CLC), CarMax, Inc (NYSE:KMX), Genuine Parts Company (NYSE:GPC), Werner Enterprises, Inc. (NASDAQ:WERN), and Astoria Financial Corp (NYSE:AF). Basswood lost on shorts in iShares Russell 2000, KBW, Inc. (NYSE:KBW), New York Community Bancorp, Inc. (NYSE:NYB), Banco Santander, S.A. (NYSE:SAN) (MCE:SAN), and M&T Bank Corporation (NYSE:MTB).
A large investment firm Halcyon Asset Management invests in long/short strategies through its hedge funds. The total assets for the hedge funds range near $4.5 billion. Halcyon Offshore Asset Management was up 9.51 percent year to date, and returned 0.78 percent in September. Our sources tell us that the fund was able to gain from the recent upswing in markets. Credit strategies take up the highest exposure in the fund. The fund invests in mergers as well, and is gaining from BCE Inc’s (NYSE:BCE) acquisition of Astral Media, Inc. (TSE:ACM.A) (TSE:ACM.B), which is expected to finalize soon.
Halcyon’s long positions in General Motors Company (NYSE:GM) and Ambac Financial Group, Inc. (PINK:ABKFQ) and Ally Financial Inc are also up, and the fund expects to receive profits as Lehman Brothers distributes the second round of claims. Halcyon’s holding in Kinder Morgan Inc (NYSE:KMI) is also profiting in the face of its acquisition by El Paso LLC (NYSE:EP). Kinder Morgan’s stock has still not realized its full value according to Halcyon.
A small but upcoming hedge fund, Permian Investment Partners, with close to $200 million in total assets, uses a long/short strategy and has gained a handsome 16.2 percent as of the end of September. As of October 31st, the fund was up 18.7% net of fees. *
Permian has mainly gained from its short portfolio over the past two years. The fund is long on Colfax Corp (NYSE:CFX) and expects this company to grow from recent acquisitions and from its well established business throughout US, Europe, and EMs. Permian’s significant long performers for the year have been Kroton (KROT11), Atos SA (EPA:ATO), and Merck & Co., Inc. (NYSE:MRK). Other positions in the long portfolio are Obrascon Huarte Lain SA (MCE:OHL) and Vivendi SA (EPA:VIV). The fund’s short portfolio includes Kenmare Resources plc (LON:KMR), Axel Springer AG (ETR:SPR), and Molycorp Inc (NYSE:MCP).
* A previous version of this article states that founder Cara Goldberg had lunch with Warren Buffett. According to the fund, Cara Goldberg has left the firm. Additionally, we want to emphasis that there is no connection between Buffett and the fund in any manner. Additionally, we have updated performance numbers through October 31st 2012.