For fund managers, including those at one of the industry’s biggest conferences in New York, optimism over last week’s market rally was shattered by another crushing blow on Tuesday, when the S&P 500 fell. 4.3% drop. Many funds were already sitting on declines of 30% or more.
Speakers on a panel on the state of the industry at SALT New York 2022 urged investors to hold their bets, saying the downturn could become an opportunity to make money.
But offstage, the mood was darker.
“It will take a lot of work to get out of this hole,” said David Moon, managing director of Symmetric.io, which tracks hedge fund managers’ investments and returns.
Even before this week’s decline, funds that bet on tech and healthcare stocks have felt the pain. Whale Rock Capital Management LLC’s main fund tumbled 38% through August, while HMI Capital Management fell 39% in the first eight months of the year. Casdin Capital fell by 50% and SoMa Partners by 31%.
Other leading fund managers, some of whom got their start with the late Julian Robertson, credited with helping pioneers make money when stocks fall, are also in the red. Coatue Management lost 17% in the first eight months of the year, while Maverick Capital lost 27% in August.
Representatives of these funds declined to comment.
“I’ve been through nine bear markets and they suck absolutely,” said Anthony Scaramucci, managing partner at investment firm SkyBridge Capital and founder of the three-day SALT conference.
The broad S&P 500 index fell 17% in August, while the average hedge fund fell 4% in August, according to Hedge Fund Research (HFR). The HFR Technology and Healthcare Index was down about 15%.
Goldman Sachs reported that hedge funds again filled up on tech stocks last week, making it the strongest wave of buying in the sector in seven months.
For many of these funds, this year’s losses come after a string of strong returns fueled by a decade-long bull market, investors and fund managers say.
And not all hedge funds are in bad shape this year.
Citadel said its Wellington fund returned 3.74% in August, bringing its year-to-date return to 25.75%. DE Shaw, in his Composite fund, reported a 20% gain to investors. Representatives of these companies declined to comment.
At the SALT conference, poor returns were top of mind as the focus was also on cryptocurrency investments rather than hedge funds. Many of the top investors who have participated over the years, including Steven A. Cohen, Daniel Loeb and Ray Dalio, were absent. The private concerts and pool parties that were in the spotlight when the conference was held at the Bellagio in Las Vegas have been replaced by buffets of pasta, tacos and salads at the cavernous Jacob K. Javits Convention Center in Manhattan. .
Two hedge fund executives who skipped SALT this year told Reuters they were worried about the optics of paying thousands of dollars for a note at a time when investors were withdrawing capital from their companies.
Greg Jensen, co-chief investment officer at Bridgewater Associates, one of the world’s largest hedge funds founded by Ray Dalio, echoed this darker tone. Financial markets have not fully priced in the prospect of a recession, he warned, just hours before the market tumbled on Tuesday and slipped further on Wednesday.