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Tough June for Hedge Funds as They Struggle to Keep Gains

Thursday, 7 Jul 2011 | 12:18 PM ET

A whipsawing equities market and a reversal in commodities made June a tough month for someof the world’s biggest hedge funds .

NYSE Trader
Photo: Oliver Quillia for CNBC.com
NYSE Trader

For Paulson & Co., the $38 billion fund company, the last couple of months have been brutal, rendering its Advantage fund down roughly 12 percent for the year through June 30, according to one investor.

Third Point LLC’s Offshore fund, which has enjoyed a robust year so far, fell 2.6 percent, according to someone briefed on the performance, but hung on to an upside of 6.8 percent for the year. And Moore Capital’s flagship fund, which has also struggled in recent months, fell roughly 3 percent in June and about 5 percent for the year, according to people briefed on that fund’s results.

Other heavy hitters managed to preserve their gains for the year, but gained little new traction. SAC Capital’s flagship fund, for instance, hung on to the roughly 9 percent gains it had made in May, according to people briefed on its performance without moving the needle. Brevan Howard’s flagship fund fell 0.5 percent in June, said someone familiar with its performance but is still up 2.5 percent on the year.

Between the sharp reversal midmonth in the S&P—which was choppy for much of June but staged a dramatic upswing in the month’s final days—and a rollover in crude-oil prices, many fund managers were caught flatfooted, said one macro trader, who called the market “rationally schizophrenic.”

Some long-short equity fund investors say they are impressed with this year’s returns out of SAC Capital, run by the secretive trader Stevie Cohen. But they also remain anxious about the legal cloud that still swirls around the firm in the wake of insider-trading charges that snagged two of SAC’s former traders. (The firm has said it is cooperating with authorities.)

Amid the lingering questions, SAC plans to close its flagship fund to new investors on Aug. 1, says someone familiar with the matter. Nonetheless, the firm is pressing ahead with plans to open a new quant fund in the third quarter of the year, this person added.

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This post was updated on July 12 to reflect that the Advantage fund was down roughly 12 percent for the year through June 30, according to one investor.


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