By Maiya Keidan and Svea Herbst-Bayliss
TORONTO, BOSTON -Stock-picking hedge funds ended a volatile January with losses after markets went on a roller-coaster ride on geopolitical turmoil and the prospect of rising interest rates, but market participants say the performance has not dampened demand.
Equities hedge funds lost 6.22% in January, according to a note from Goldman Sachs reviewed by Reuters, a steeper decline than the 5.23% loss on Wall Street’s S&P 500 benchmark, while health-care and technology-focused strategies slid more than 10%. Goldman confirmed the figures in the note.
While hedge funds that take long and short positions struggled in January, investor appetite for the strategy is still going strong, said market participants.
“For long-short equity, a lot of managers are in the red but now that they have printed month-end, we did see a little bit of a rally back from where they were earlier in the month,” said Joshua Leonardi, U.S. Head of Capital Introduction at TD Securities.
“Allocators continue to ask for managers that have strong ability to short single names and can generate alpha.”
Billionaire investor William Ackman’s Pershing Square Holdings lost 8.2% in January, tumbling early in the month and then clawing back returns in the last week.
The Pershing Square Holdings portfolio ended the first three weeks of January down 13.8%, the worst performance to start a year for Ackman in years.
However, Pershing Square Holdings lost 1.3% in both January 2021 and January 2020 after making gains of 18.3% in the first month of 2019.
Tiger Global Management’s hedge fund lost 14.8% in January while Whale Rock Capital Management’s hedge fund lost 15.9% over the same period in its share class that invests in public and private companies, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
Melvin Capital Management and Light Street Capital Management lost 15% last month, according to sources familiar with the firms. A spokesperson for Light Street declined to comment. A spokesperson for Melvin also declined to comment.
Balyasny Asset Management, which manages $14 billion in assets, gained 2.4% over the same period, an investor told Reuters.
A spokesperson for Balyasny declined to comment.
Computer-based hedge funds landed in positive territory in the first month of the year, posting returns of 5.3%, said the note from Goldman.
Among computer-based firms, multi-billion-dollar AQR’s alternative risk premia fund ended January up 7.14%, according to its website.
(Reporting by Maiya Keidan and Svea Herbst-Bayliss, additional reporting by Matt Scuffham; Editing by David Gregorio, David Evans and Richard Pullin)
