Friday March 10, 2017 March 10, 2017 The Long and the Short: How Managers Are Playing Upcoming Elections Elections in the Netherlands next week will set the tone for upcoming ballots in France and in Germany that will determine whether the voter anger that prompted the U.K.’s Brexit decision and brought Donald Trump to the White House is reverberating across mainland Europe. Here we take a look out how hedge fund managers are betting around this year's elections. Tepper Is Long Europe Stocks, Short Bonds David Tepper, the founder of Appaloosa is betting long on European stocks Management, despite the political risks with the upcoming French election. "It’s a probability game in Europe," Tepper said March 8 in an interview on CNBC. Valuations there are "much much lower" compared with the U.S. He doesn’t expect French presidential candidate Marine Le Pen, a staunch nationalist who advocates that France leave the euro, to win the election, though its outcome remains a concern, he said. — Simone Foxman and Vincent Bielski Northlight Sees Rally in Europe HY Debt Improving GDP growth in Europe and diminishing political risk will lead to a rally in European high- yield debt and triple C-rated bonds, according to , partner and portfolio Charles-Henri Lorthioir manager at . Northlight Group "The beginning of Trump's presidency has been a bit chaotic to say the least," Lorthioir said on a telephone call on Feb. 28. "Europeans have been following the U.S. very closely, and may be a bit more cautious to empower some of these more populist figures. They're starting to realize that running a country is a bit more complex if you're a populist." Geert Wilders, the leader of the Party of Freedom in the Netherlands, is "no longer highlighting Trump in his campaign," Lorthioir said. If this sentiment continues, "political risk will diminish significantly, leading to a broader rally for European risk assets," he said. The bonds should also benefit from improving GDP growth in Europe, which Lorthioir forecasts will reach 1.8 percent this year from 1.7 percent in 2016. The Northlight European Fundamental Credit Fund, a long- short fund focused on high-yield credit and leveraged loans, is up 1.4 percent in the first two months of the year after a 0.5 percent gain in February, according to an investor letter seen by Bloomberg Briefs. — Suzy Waite Europe Good Investment After 'Dust Settles' There's value to be found in European risk assets in the infrastructure, energy, defense and financial sectors, according to Algebris . Investments "Strong macro data and a recovery in corporate fundamentals make Europe a good investment after the political dust settles," , Alberto Gallo partner and portfolio manager, wrote in his latest report, released March 8. He pointed to three catalysts that can reprice European assets: Marine Le Pen losing in France, a normalization in monetary policy and a post-election opening of Germany to fiscal stimulus. "While the reflation scenario is very well priced in U.S. assets, we think Europe's positive case is still contrarian and undervalued," he said via e-mail on March 8. "We express that through upside exposure to inflation and assets linked to fiscal stimulus (infrastructure, defense) and higher interest rates (financials), while we are hedged against a rise in interest rates." — Melissa Karsh Amplitude Sees More Countries Leaving EU Karsten Schroeder, CEO of $1.7 billion , said the euro zone was Amplitude Capital "flawed" from the beginning and has caused a lot of challenges for the individual member states. "When you run one single currency, you have to have a strong European Parliament, you have to have common policies, [and] common understandings when it comes to fiscal policy, when it comes to employment markets, when it comes to the overall economic stimulation," Schroeder told Bloomberg TV March 9. "I don't think we have that agreement in Europe. ... It's a matter of time when the euro as a currency is getting weaker and weaker and more countries are going to leave the euro zone." There's a decoupling between Europe and the U.S., according to Schroeder. The divergence in interest-rates policy and price movements in the equity markets provides a "more attractive environment," he said. — Melissa Karsh Inside Lansdowne and Marshall gained in Feb.: Wace Returns Investor appetite for Western has fallen: Europe Survey Numen a UCITS fund; starts from Millennium hires Moore RAM AI is long materials, short consumer staples: Q&A Returns in Brief Source: Bloomberg/ Andrew Harrer Source: Northlight Source: Algebris Source: Bloomberg TV
Transcript
Friday
March 10, 2017
March 10, 2017
The Long and the Short: How Managers Are Playing Upcoming ElectionsElections in the Netherlands next week will set the tone for upcoming ballots in France and in Germany that will determine whether the voter anger that prompted the U.K.’s Brexit decision and brought Donald Trump to the White House is reverberating across mainland Europe. Here we take a look out how hedge fund managers are betting around this year's elections.
Tepper Is Long Europe Stocks, Short BondsDavid Tepper, the founder of Appaloosa
is betting long on European stocks Management,despite the political risks with the upcoming French election.
"It’s a probability game in Europe," Tepper said March 8 in an interview on CNBC. Valuations there are "much much lower" compared with the U.S. He doesn’t expect French presidential candidate Marine Le Pen, a staunch nationalist who advocates that France leave the euro, to win
the election, though its outcome remains a concern, he said.— Simone Foxman and Vincent Bielski
Northlight Sees Rally in Europe HY DebtImproving GDP growth in Europe and diminishing political risk will lead to a rally in European high-yield debt and triple C-rated bonds, according to
, partner and portfolio Charles-Henri Lorthioirmanager at .Northlight Group
"The beginning of Trump's presidency has been a bit chaotic to say the least," Lorthioir said on a telephone call on Feb. 28. "Europeans have been following the U.S. very closely, and may be a bit
more cautious to empower some of these more populist figures. They're starting to realize that running a country is a bit more complex if you're a populist."
Geert Wilders, the leader of the Party of Freedom in the Netherlands, is "no longer highlighting Trump in his campaign," Lorthioir said. If this sentiment continues, "political risk will diminish significantly, leading to a broader rally for European risk assets," he said.
The bonds should also benefit from improving GDP growth in Europe, which Lorthioir forecasts will reach 1.8 percent this year from 1.7 percent in 2016.
The Northlight European Fundamental Credit Fund, a long-short fund focused on high-yield credit and leveraged loans, is up 1.4 percent in the first two months of the year after a 0.5 percent gain in February, according to an investor letter seen by Bloomberg Briefs.
— Suzy Waite
Europe Good Investment After 'Dust Settles'There's value to be found in European risk assets in the infrastructure, energy, defense and financial sectors, according to Algebris
.Investments"Strong macro data and a recovery in corporate
fundamentals make Europe a good investment after the political dust settles," , Alberto Gallopartner and portfolio manager, wrote in his latest
report, released March 8.He pointed to three catalysts that can reprice European
assets: Marine Le Pen losing in France, a normalization in monetary policy and a post-election opening of Germany to fiscal stimulus.
"While the reflation scenario is very well priced in U.S. assets, we think Europe's positive case is still contrarian and undervalued," he said via e-mail on March 8. "We express that through upside exposure to inflation and assets linked to fiscal stimulus (infrastructure, defense) and higher interest rates (financials), while we are hedged against a rise in interest rates."
— Melissa Karsh
Amplitude Sees More Countries Leaving EUKarsten Schroeder, CEO of $1.7 billion
, said the euro zone was Amplitude Capital"flawed" from the beginning and has caused a lot of challenges for the individual member states.
"When you run one single currency, you have to have a strong European Parliament, you have to have common policies, [and] common understandings when it comes to fiscal policy, when it comes to employment markets, when it
comes to the overall economic stimulation," Schroeder told Bloomberg TV March 9. "I don't think we have that agreement in Europe. ... It's a matter of time when the euro as a currency is getting weaker and weaker and more countries are going to leave the euro zone."
There's a decoupling between Europe and the U.S., according to Schroeder. The divergence in interest-rates policy and price movements in the equity markets provides a "more attractive environment," he said.
— Melissa Karsh
InsideLansdowne and Marshall
gained in Feb.: Wace ReturnsInvestor appetite for Western
has fallen: Europe SurveyNumen a UCITS fund; starts
from Millennium hires MooreRAM AI is long materials, short consumer staples: Q&A
Returns in Brief
Source: Bloomberg/ Andrew Harrer
Source: Northlight
Source: Algebris
Source: Bloomberg TV
Hedge Funds Europe 2 March 10, 2017
Returns in Brief
Lansdowne Partners LP’s main hedge fund gained 4.6 percent in February, according to a performance update seen by Bloomberg Briefs. The $9 billion Lansdowne Developed Markets Fund has returned 1.6 percent so far this year, after losing almost 15 percent in 2016. A spokesman for the London-based firm declined to comment.
— Nishant Kumar and Melissa Karsh, with
assistance from Saijel Kishan
Marshall Wace LLP's MW Europa Fund is up 1.7 percent in its U.S. dollar share class in February, bringing year-to-date returns to 1 percent, according to a performance report seen by Bloomberg Briefs. The MW Global Opportunities Fund rose 1.8 percent in its U.S. dollar share class last month and is up 5 percent this year, the report said. The firm didn't respond to an e-mail seeking comment.
— Darshini Shah and Nishant Kumar
Castellain Capital's Castellain Value Fund rose 1.4 percent in February to bring year-to-date returns to 3.6 percent, according to a performance report seen by Bloomberg Briefs. The 34 million-pound ($42 million) fund, which is managed by Castellain founder Robert
, returned 17 percent last Goldsmithyear. A fund spokesman declined to comment.
— Darshini Shah
Brevan Howard Asset Management’s main hedge fund gained 2 percent last month to bring year-to-date returns to 0.5 percent, according to an investor letter seen by Bloomberg News. The Brevan
managed $11 Howard Master Fund billion in January. A spokesman for the firm declined to comment.
— Nishant Kumar
's Oddo Meriten Asset ManagementOrsay Merger Arbitrage Fund gained about 1 percent in February, according to an investor report seen by Bloomberg Briefs. The Paris-based fund was down about 2 percent in the first two months of the year, after gaining 15 percent in 2016, the report showed. Rite Aid Corp., Manitoba Telecom Services Inc. and Actelion Ltd. had "notable" gains in the month that benefited performance, the report said, while positions in Cabela's Inc. and a small-cap stock, which sold off
after being notified of a phase 2 antitrust review, detracted from performance. "After a relatively strong start to the year deal flow wise, this month was a bit of a
disappointment as January’s deal flowstrength did not carry over into February,"according to commentary in the investor
document. "While the spreads in many of the newer deals remained too tight for
us, we found many investment opportunities in some of the older
situations, which were volatile. This allowed us to continue to manage the
fund with a high leverage. We therefore continue to be optimistic on our ability to
The deliver good performance for 2017." fund has 274 million euros ($289 million) in assets. A spokesman for the firm declined to comment.
— Melissa Karsh and Nishant Kumar
Och-Ziff Capital Management Group, the $33.7 billion publicly traded hedge fund led by , lost 0.2 percent Dan Ochlast month in its OZ Europe Master Fund, according to filings, dated March public 2. The fund was up 1.8 percent in the first two months of the year, after gaining 3.7 percent last year, the filing said.
— Melissa Karsh
RBR Capital Advisors AG's money pool gained 4.6 percent in February, according to an investor letter seen by Bloomberg News. An investment in GAM Holding AG contributed 1.85 percent to the gains of RBR European Long Short fund, the letter shows. The fund is down 2 percent this year. A representative for RBR confirmed the newsletter's contents.
— Nishant Kumar
Survey Says...
February Returns
Year-to-Date Returns Through February
Funds in the charts not mentioned in the accompanying text on this page were reported in other issues of the Brief or in Bloomberg News stories. For questions, e-mail [email protected].
Investor Appetite for Western Europe Diminishes in 2017: Deustche BankBy Melissa KarshInvestor appetite for Western Europe has declined slightly this year, given uncertainties surrounding the U.K.'s Brexit plan, the forthcoming elections and an expected economic growth slowdown, according to a survey by Deutsche Bank.
A net 17 percent of respondents said they would increase their exposure to the region, compared with 35 percent last year, when it was the most sought-after region, the survey released March 8 showed. North America was the most sought-after investment region this year.
Deutsche Bank surveyed 460 investors with about $1.9 trillion under management or advisement.
Other highlights of the survey were:
Hedge fund clients predict withdrawals from the industry will slow this year. Respondents forecast a net $1 billion leaving the private partnerships in 2017.
Macro funds will be the biggest draw. On a net basis, 27 percent of the investors said they were planning to add
to the strategy. After the surprise outcomes of the U.S. election and the Brexit vote in 2016, “the political road ahead appears equally, if not more, uncertain as policy makers globally diverge in their approach to spur economic growth,” according to the bank's
report examining the survey results.
Fees are very much on investors’ minds. Seventy-seven percent said they want managers to offer hurdle rates, and 71 percent said management fees should be reduced as assets grow.
MSK Capital Is Bullish on NOS, Altice, ContinentalBy Suzy WaiteLondon-based is MSK Capital Partnersbullish on Portuguese television, cable and satellite broadcaster NOS SGPS, Dutch cable service company Altice NV and German tire and automotive manufacturer Continental AG, according to Chief Investment Officer Makis
.KaketsisThese companies are currently
"particularly cheap" and the stakes aim to "capture some of the potential upside from a market-friendly election outcome," he said in an email on March 9.
"We are really looking to the French election, which we see as much more important than the Dutch election," Kaketsis said.
Long-term, there are many issues plaguing the continent however. "We are
concerned by the growing reluctance by the political class to make decisions that can create a path to a resolution of issues. A big reason for this is the increasing anti-EU sentiment of local electorates that is constraining politicians from taking action."
MSK's fund gained 1.2 percent in February and is up 2.6 percent so far this year.
Market Calls, Revisted
How Did ’s Bullish Bet on B2Holding Do?Park Lane Family OfficeBy Hema ParmarLast March, ’s Park Lane Family Office
was bullish on Henrik Stang Heffermehl Oslo-based financial services provider B2Holding ASA.
The company benefits from a stricter regulatory environment for banks in Europe, will probably see rapid earnings growth due to strong deal flow and is an attractive takeover target, portfolio manager Heffermehl said in an interview published on March 15, 2016.
Since then, B2Holding has gained 9.3 percent, while the Oslo Stock Exchange Index rose 18.3 percent.
Heffermehl said via e-mail March 9 that he’s still "very positive" on the the stock, and expects it to double in price within two or three years. B2Holding is "dramatically undervalued," he said. "We are impressed with how management has executed on its strategy, with expansion to several new markets and heavy investment in NPL portfolios over the last year."
Fees
B2Holding Underperforms Oslo Stock Exchange
Click on chart for a live version or run on the Bloomberg Terminal.G #HF.BRIEF 77
Howard's New Fund Said to Seek 30% Performance FeeBy Nishant KumarAlan Howard is seeking 30 percent of the returns from his new hedge fund, exceeding the industry average and more than the main money pool run by his investment firm, according to people with knowledge of the matter.
The Brevan Howard AH Master Fund, overseen solely by him, plans to charge a 0.75 percent management fee, the people said. The average management fee is now 1.5 percent, while the performance fee is 17.5 percent, according to Hedge Fund Research Inc. A spokesman for Brevan Howard Asset Management declined to comment.
Howard’s new fund will cater to investors who want direct exposure to him and manage a mix of new, outside capital as well as money from the fund’s flagship fund, people said last month. Howard, 53, is trying to revive the fortunes of his investment firm after assets dropped to $15.5 billion at the end of 2016 from $40 billion at its peak.
Howard’s new fund and fee structure ties him more to his fund’s returns and pits him against former colleague Chris Rokos, who now manages about $7 billion for his own investment firm in London after quitting Brevan Howard in 2012. Rokos’s hedge fund charges similar fees in one of its share classes.
Critics of hedge funds ranging from Warren Buffett to college students claim the industry’s hefty fees are unjustified. Last year, investors pulled $111.6 billion from the $3 trillion industry, according to data from eVestment.
Two of Brevan Howard’s funds stopped charging existing clients management fees on new investments last year, a person said in September. The money pools earlier charged a 2 percent management fee and a reduced rate for clients who tied their money up for longer. The firm still takes a 20 percent cut of profits.
Launch
Numen Starts UCITS Fund to Protect From Rising RatesBy Melissa Karsh and Nishant KumarNumen Capital is starting a daily liquidity UCITS hedge fund this month to protect against a rising interest-rate environment.
The Numen Bear Rates Fund will invest mainly in short liquid futures, including U.S. Treasuries, German bunds, U.K. gilts, Japanese government bonds and French and Italian government bonds as well as select liquid credit indexes and options, according to , head of investor relations at the London-based firm.Abigail Cushing
The UCITS fund — the firm's second — is designed to be profitable as interest rates rise, Cushing said via telephone on March 8.
"There are several factors combining on a global scale to create an environment ripe to drive the reflation trade, which should result in a meaningful repricing in fixed-income assets," she said. "We find that most investors are unprepared for any type of correction in fixed income."
The short interest-rate fund will start trading with money from a seed investor as well as internal capital, said Cushing, who didn't specify further.
It will be managed by , who also runs the firm's flagship Numen Credit Filippo LanzaOpportunities Fund, which started in 2008. Lanza also manages the firm's credit-focused multistrategy UCITS fund, which launched in 2012, Cushing said. Lanza manages about $900 million in total strategy assets.
Lanza founded Numen in 2008.
On the Move
Millennium Said to Hire Ex-Moore Partner as PM
Bramen Singanayagam, a former partner at Moore Capital
, has joinedManagement LLC in London Millennium Management
as a money manager, according to a person with knowledge of the matter.
Singanayagam trades equities, said the person. A spokeswoman for Millennium, ’s $34.8 Israel Englanderbillion investment firm, declined to comment. Singanayagam didn’t respond to calls and an email seeking comment.
Millennium hired Morgan Stanley’s global head of equities trading, Peter Santoro, people said last month. He replaced Hyung Soon Lee, who left last year amid a restructuring of the hedge fund’s equities group.
Singanayagam, who previously worked for Steve Cohen’s former investment firm SAC Capital Advisors, joined Louis Bacon’s Moore Capital in 2014. He left the firm last year and started at Millennium earlier this month, according to records at the U.K. Financial Conduct Authority.
— Nishant Kumar
McCloskey Is President of Man Americas
Michelle McCloskey has been appointed as president of Man Americas, according to a press release on March 9.
"Michelle will work with the Americas sales team, under Eric Burl's leadership as Head of Man Americas, to deepen Man’s relationships with investors in the Americas," the press release said. "She also remains President of FRM, where she will continue to work with Keith Haydon, CIO, and Mike Turner, COO, in leading the business, which is overseen by ’s Man GroupPresident, Jonathan Sorrell."
RAM Alternative Investments Equity Fund Is Short Consumer Staples, Long Materials
The fund has returned 1.4 percent in the first two months of this year.
Quant funds offer "a good alternative" to the beta ETF industry.
Interviewed by Darshini Shah on Feb. 22 and March 6. Comments have been edited and condensed for clarity.
Thomas de Saint-Seine, CEO and Senior Equity Fund Manager, RAM AI
Q: Tell me about RAM Active Investments.A: RAM AI was founded in 2007. We use the latest technology to systematically carry out fundamental stock selection across an enormous equity universe. Our investment process is always bottom-up. We lead with the fundamentals of a stock to generate a highly-diversified portfolio. By using technology to guide our equity analysis, our investment process is purely objective, eliminating inherent selection biases. Our funds deploy an equal split of defensive, momentum and value sub-strategies that, when combined, can help to insulate investors against cycle risk and enhance returns.
Q: Let’s talk about the long-short European equities fund. How did the fund perform this year and in 2016?A: I manage that fund alongside Emmanuel Hauptmann and Maxime Botti. The fund is up 1.4 percent this year through February. In 2016, it was down 4 percent. Markets in 2016 were not conducive to either a beta-neutral approach, nor investment based on fundamental logic. Funds that outperformed benefited from investments in value low-quality stocks and event-driven strategies. Since inception in December 2011, our fund has delivered annualized returns of 7.1 percent. As of Feb. 8, the fund’s AUM stood at 579 million euros ($611 million).
Q: How is the portfolio currentlypositioned?
The fund has taken a new net shortA:
position in consumer staples, while increasing its long bet in materials. Geographically, we have tapered our net long position on the U.K., while allocating more capital net long in Germany and Denmark. Overall, long positions in Nordic countries have been increased.
Q: What situations are you looking out for this year and how are you hoping
to capitalize on that? We expect, and hope, this to be the A:
year for the discretionary stock-picker. Markets look as though they will remain favorable to companies’ fundamentals and, over the next few months, European equity markets look ready to revert to this fundamental logic.
With elections in France and Germany and Donald Trump reaching a record of unpopularity, political uncertainties are creating volatility in markets. This means the high diversification wedded to our long-short beta-neutral approach could be important in helping mitigate potential upcoming turbulence.
After a few years of strong inflows in
favor of ETFs, crowding effects on ETFs have become more visible.
Q: Quants were the only strategy lastyear to see inflows, as the hedge fund industry saw the most outflows since
2009. Are you doing anything to capitalize on this popularity?
Quant investment has become A:increasingly popular with more and bigger players within the market. The most popular strategies based on traditional factors — smart beta — imply more volatility or crowding effects and lower excess return as markets are more arbitrated than before.
Subsequently, quant managers have had to develop new strategies and to take advantage of new sources of inefficiencies. Quant research is fundamental to maintain its edge, and increase the de-correlated sources of returns. New technologies offer plenty of new possibilities for the smarter quant firms. We believe that quants will continue to grow in the future as they offer a good alternative to the beta ETF industry.
At a Glance
Age: 44: Geneva, SwitzerlandResidence
Credit Agricole, Reyl Group, RAM Active InvestmentsProfessional background: University of Paris X, NEOMA Business SchoolEducation:
Gstaad in the middle of the Swiss OberlandFavorite city: "The Royal Game" by Stefan ZweigRecommended book:
Music, skiing, pilates, mountain trekking, winesHobbies:Who would you love to have dinner with (living or dead): David Bowie
DATE ORGANIZER EVENT SPEAKERS/ATTENDEES OF NOTE LOCATION
March 15 Markets GroupPrivate Wealth Switzerland Forum
Maximilian Kunkel, UBS; , Banque Privee Edmond de Rothschild; Jan Gilles PrinceVan Bueren, Union Bancaire Privee; Jay Oberai, Synergy Asset Management.
Geneva
March 15 TSAMThe Summit for Asset Management
Leon Kamhi, Hermes; Neuberger Berman; Stephen Chrystelle Charles-Barral,O'Donoghue, AIG.
London
March 21 Markets Group Private Wealth UK ForumPer Wimmer, Wimmer Family Office; , MASECO Private Wealth; Josh MatthewsChristian Armbruester, Blue Family Office.
London
March 27-28
Battle of the Quants Worldwide
Battle of the Quants FrankfurtHolger Knauer, Catana Capital; RavenPack; Matthew Sandretto, Peter Hafez, Greyfeather Capital.
Frankfurt
March 28 Bloomberg Hedge Fund Start-up ConferenceDaniel Johnson, SS&C; Paul Spendiff, Apex Fund Services; Andrew Welch, ACA Compliance; Kevin Loprimo, Cowen; Martin Cornish, MJ Hudson.
April 25-26 WBR TradeTech Europe 2017Alison Hollingshead, Man Group; Millennium; GLG Tom Ungi, Erik Koenig,Partners; L&G Investments; Goldman Sachs.Ed Wicks, Christian Morgenstern,
Paris
May 7-9 Context Summits Context Summits Europe 2017 One-on-one meetings. Barcelona
May 8-12 informaGlobal Derivatives Trading & Risk Management
Zoltan Eisler, Capital Fund Management; Gregory Pelts, BlackRock; Grigorios Papamanousakis, Aberdeen; Andrea Alberto Castaldi, Whitehaven Trading.
Barcelona
May 9-10 Prestel & Partner Family Office Forum To be released. Germany
May 9-10 SmithNovak NPL Europe 2017Massimo Ruggieri, Elliott Advisors; CarVal; Natalia Joubrina, Massimo Massimilla, Algebris; TPG; Anne Frohling, ECB; Nick Smith, Bank of Cyprus.Stefano Questa,
London
May 10 informaHedge Fund Emerging Manager and Startup Forum
Ben Cossey, Stable Asset Management; HFIM; New Tushar Patel, Rozenn Peres,Alpha Asset Management.
London
May 15-17 marcus evans European Pensions & Investments Summit 2017
To be released. Switzerland
June 12-14
informa FundForum InternationalLaurent Ramsey, Pictet; PFA; Lyxor; Allan Polack, Nicolas Moussavi, Luke Ellis, Man Group; Tages Capital; PGIM; Salvatore Cordaro, Mike Collins, Fiona Frick, Unigestion.
Berlin
DISCLAIMER: The information on this page was compiled by Bloomberg from multiple sources, public and private, and is deemed to be accurate, but not definitive or exhaustive. Questions about events should be addressed to the event organizer.
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