After the market madness of March, April proved a steadier, though downbeat month, with lingering concerns over the health and stability of the global banking system, ongoing geopolitical risks, and a weaker corporate earnings picture.
- March madness hits fund performance
- Hedge funds short UK plc as IMF delivers gloomy forecast
- Singer prefers credit collapse to hyperinflation
By Mark Kitchen
Head of Intelligence, Hedgeweek
After the market madness of March, April proved a steadier, though downbeat month, with lingering concerns over the health and stability of the global banking system, ongoing geopolitical risks, and a weaker corporate earnings picture.
The month began with news of losses at several big-name hedge fund firms, including Rokos Capital Management (-15%) and Brevan Howard (-4.2%) as the toll from the previous month’s market turmoil, which caught macro managers and others flat-footed, became apparent.
CTAs in general were caught off-guard with SocGen reporting a -6.4% return for its CTA Index – its worst performance since November 2001 – while data from Bloomberg indicated an even heavier -7.18% fall for global CTA’s.
Past problems caught up with Odey Asset Management too, with the London-based hedge fund firm announcing plans to shutter a commodities-focused hedge fund, personally backed by founder Crispin Odey, following losses linked to large Russian positions last year. The Odey Concentrated Natural Resources Fund, which was started by portfolio manager Henry Steel in 2019, lost 20% last year after writing down it’s Russian bets to zero.
Activist Paul Singer meanwhile, the head of Elliot Management, delivered a seriously downbeat assessment of the current economic situation in an interview with The Wall Street Journal, saying that the recent market turbulence may only be the beginning of an “an extraordinarily dangerous and confusing period”, even going so far as to suggest that a credit collapse and deep recession may be needed to restore financial markets.
The month brought gloomy news for the UK economy too, with new IMF data showing a worsening economic outlook for the country with performance in 2023 predicted to be the worst among the G20 nations. A couple of big-name hedge funds seemed to be in-step with the IMF’s forecast, with Marshall Wace establishing significant short positions in several UK retailers, including 1.28% net short position against £8.8 billion high street and online fashion retailer Next, 0.68% short bet against £10 billion Burberry Group, and a 0.9% short position in the £5 billion variety store chain B&M, after the sector saw sales fall in March.
The London-based manager also established a 0.61% short position in NatWest, the biggest ever short bet against the UK bank recorded by the Financial Conduct Authority.
Ken Griffin’s Citadel bet big against UK plc too, taking up short positions in 21 UK stocks, including ASOS, abrdn, Wetherspoons, boohoo, Deliveroo, The Gym Group and Savills, according to new Financial Conduct Authority (FCA) short selling disclosure data.
It wasn’t all doom and gloom though, as winter – officially at least – gave way to spring, with Citadel reporting a 1.38% monthly gain for its flagship Citadel Wellington fund, while Glen Kacher’s Light Street Capital Management scored a remarkable turnaround in its fortunes, reporting a 19.2% Q1 gain, having earlier suffered a 54% annual loss in 2022.
AIMA meanwhile highlighted cautious optimism for the year ahead among global hedge fund managers in general, with the AIMA Hedge Fund Confidence Index up slightly to 16.3%, marking an improvement in sentiment since the end of last year.
