Top Funds' Activity in Q2 2023

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Cristin Flanagan and Isabelle Lee of Bloomberg report US equities remain in retreat as bonds rebound: 

Stocks resumed a slide as fears of higher global interest rates weighed on sentiment while bonds bounced off recent multiyear lows.

The S&P 500 edged down in Friday trading while the MSCI’s global equities benchmark remains on track for the biggest weekly loss since March. The cyclically-oriented Dow Jones Industrial Average was little changed while the tech-heavy Nasdaq 100 remained lower on the day. Bitcoin slid as much as 8% and oil was set for its first weekly loss since June.

While fears of an imminent recession are fading, wary investors are instead facing entrenched inflation and the prospect of more policy tightening.

“Investors are concerned that if bond yields continue going higher, the economy is too strong and the Fed will need to raise interest rates further,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “And with the bond yield high enough, that poses competition for equity investors who feel the bond market is less risky than the stock market right now.”

Global bonds bounced higher Friday on speculation losses may be overdone. In Treasuries, yield on the 10-year pulled back from Thursday’s levels that were approaching the highest since 2007. UK and German bonds advanced.

Markets are on edge ahead of the annual gathering of policy makers at Jackson Hole in Wyoming next week, according to Andrew Hunter, deputy chief US economist at Capital Economics.

“Expectations of an economic re-acceleration have mounted,” Hunter wrote. “But with little evidence that stronger growth will threaten to reignite inflationary pressures, we don’t think there is any need for Powell to dust off his hawkish script from last year’s event.”

In another sign of nervousness, the Cboe Volatility Index climbed above 18, touching the highest level since May. Bank of America Corp.’s Michael Hartnett warned that stocks may drop another 4%, given China’s economic turmoil and jump in bond yields.

Options expiration is also catching the attention of traders. There’s some $2.2 trillion of longer-dated contracts tied to stocks and indexes scheduled to mature on Friday, according to an estimate by Rocky Fishman, founder of derivatives analytical firm Asym 500.

Not everyone on Wall Street is confident that an economic slump can be avoided. Wall Street curmudgeon and co-founder of the Boston-based investment firm Grantham Mayo Van Otterloo, Jeremy Grantham, reiterated his call for a recession.

Artificial intelligence is very important said Grantham, after the boom in AI-tied stocks staved off his dire earlier predictions for a market reckoning, but “it’s perhaps too little too late to save us from a recession.”

Nvidia Corp., the poster child for the AI-fueled stock frenzy, is due to report earnings on Wednesday.

“Markets are being hit by a perfect storm amid surging rates, worsening data in China and poor summer liquidity,” Emmanuel Cau, a strategist at Barclays Plc, wrote in a note.

In other markets, Bitcoin traded around $26,000. Elon Musk’s SpaceX sold the cryptocurrency after writing down $373 million, The Wall Street Journal reported.

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.1% as of 1:34 p.m. New York time

  • The Nasdaq 100 fell 0.4%

  • The Dow Jones Industrial Average was little changed

  • The MSCI World index fell 0.3%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro was unchanged at $1.0872

  • The British pound was little changed at $1.2745

  • The Japanese yen rose 0.5% to 145.13 per dollar

Cryptocurrencies

  • Bitcoin fell 6.4% to $25,873.07

  • Ether fell 3.6% to $1,655.4

Bonds

  • The yield on 10-year Treasuries declined two basis points to 4.25%

  • Germany’s 10-year yield declined nine basis points to 2.62%

  • Britain’s 10-year yield declined seven basis points to 4.68%

Commodities

  • West Texas Intermediate crude rose 1.4% to $81.49 a barrel

  • Gold futures were little changed

Lu Wang of Bloomberg also reports hedge funds reload on shorts after rushing to unwind stock bet:

Fast-money stock skeptics who got throttled in July are charging back undaunted.

Hedge funds that make both bullish and bearish equity wagers boosted short sales in eight of the 10 sessions through Monday, according to data compiled by Goldman Sachs Group Inc.’s prime brokerage unit. Halfway into August, the dollar amount of bearish wagers has already more than doubled the volume of positions covered in July, the firm’s team including Vincent Lin found.

While shorts often proliferate as markets fall, the swiftness with which they are being deployed now is notable. Hedge funds just finished a furious retreat from markets broadly, trimming longs and shorts in a process known as de-grossing that by one measure was the fastest since the retail-fomented short squeeze in 2021.

“Trading flows point to a reversal in trends,” Lin wrote in a note this week. That’s “suggesting renewed risk appetite.”

The data suggests another force behind the equity selloff pushing the S&P 500 toward its worst month of the year amid a run-up in bond yields. Other widely cited culprits include traders in zero-day options and market markers whose shift in derivatives positioning turned them into a source of market turmoil.

Short sellers are surfacing as the S&P 500 is poised for its third straight weekly drop. The benchmark index is down 5% in August, while a basket of most-shorted stocks kept by Goldman has fallen 18%, handing profits to bears.

To bulls who watch sentiment for an inflection in market trends, the resurgent skepticism may be welcome news as it can set the stage for a bounce, as happened last October. Back then, almost everyone was prepared for a recession. Yet as economic and earnings data streamed in better than feared, stocks rallied, forcing investors of all strips to chase gains.

Whether the current bout of selling constitutes such a turning point is, of course, unknown. Flows into equity-focused exchange-traded funds have turned negative in the past week, data compiled by Bloomberg show. In a poll by the National Association of Active Investment Managers (NAAIM), equity exposure slipped from the highest since November 2021.

Yet all the exits lack the kind of urgency that have traditionally set the stage for a market bottom. Trading volume has stayed in line with 2023’s average. The cost of options, as indicated by the Cboe Volatility Index, has climbed from the year’s lows, but still remains below its long-term mean.

JPMorgan Chase & Co.’s prime brokerage unit observed a similar trend among their hedge fund clients, with flows turning to “modest” re-grossing. To the team including John Schlegel, it’s too early to call the all-clear.

“The markets could be somewhat weak for a little longer, given the recent drops follow very big increases” in positioning, they wrote in a note Thursday. “It’s not clear we’ve seen capitulatory selling.”

US stocks recovered from steep early losses in Friday's session but ended the week with sharp drops as an August swoon continued for Wall Street.

Right now, it's all about rates, as the benchmark 10-year Treasury yield hit 4.3% on Thursday, many market participants are nervous something will break when long bond yields rise to multi-year highs:

It also doesn't help that rates are going higher all over the world, well-known market bulls are warning of bond vigilantes, well-known economists are saying 5% is here to stay and extreme shorts in the long end of the yield curve are delivering massive volatility:

And then there's China and Bitcoin:

No wonder we are going from one extreme in July to another in August and they're selling good news on earnings:

Of course, if you ask me, signs of a hard landing are picking up steam:

I will repeat what I've said many times before, this isn't going to end well. Central banks around the world led by the Fed are continuing to tighten into a slowdown which leads me to conclude we are heading for the deepest and most prolonged recession since the 1970s and we are about to enter a prolonged bear market in stocks.

In late July, when I openly wondered when will the stock market crash, I wasn't trying to scare people but have seen this movie so many times before, it never ends well.

We will see if this is just an August bump or something more serious, too soon to tell, but clearly the magnificent rotation is underway.

This week, I covered the mid-year results of three important Canadian pension investment managers:

A few things struck me:

  • Diversification across public and private markets and across geographies is very important
  • With yields north or 4%, bonds are back in vogue
  • Private credit remains an important asset class as banks retrench from lending
  • Most of Canada's large pension investment managers have a value/ quality tilt in their Public Equities and most of are underweight technology shares in public equities, preferring to invest more in tech in private equity.
  • Costs are up in US private equity as wage inflation picks up steam which is is EBITDA growth is slowing.
  • Cap rates are rising weighing down on real estate asset values.

Most of the people I talk with expect rates to stay higher for longer and everyone will be listening to Fed officials next week at the Jackson Hole summit to get clues on monetary policy heading into that September meeting.

I don't know if the Fed will hike once more but we are closer to the end in the near term.

Longer term, if wage inflation picks up significantly, then I am worried central banks will have to resume hiking rates and this will really kill the economy and stock market.

We shall see but 2024 will prove to be a lot more difficult for all stock pickers as the recession takes hold.

What did the gurus buy and sell in Q2 2023?

My long preamble on a Friday when I should be relaxing after a long week is there to warn all of you to take the latest 13-F filings with a grain of salt as markets are moving from one extreme to another and the data is lagged by 45 days (was released earlier this week on August 15th).

Below, Bespoke provides you with a list of the 35 best and worst performers in the Russell 1000:

Now, a quick glimpse tells me the most shorted/ low quality stocks are getting clobbered this month and the most profitable/ high quality stocks are being bid up.

Moreover, over the past month, Energy shares are up almost 8%, Healthcare up 1% and the rest of the sectors are down with Information Technology and Consumer Discretionary being the worst performers, down 9% and 7% respectively as mega cap tech shares sell off:

Will this continue in the second half? I'm worried the sell-off in mega cap tech stocks takes the entire market lower, especially as signs of a recession become clearer.

Too soon to make these predictions, I haven't seen a major credit event yet to start worrying about a crisis but my guard is definitely up and I don't give a damn what Soros, Griffin and other gurus are buying and selling as they hedge their portfolios very carefully and skillfully.

It is interesting to note, however, how the hunt for hedge fund talent is intensifying among large, well-known funds and that tells me they're preparing for a major downturn ahead:

Alright, enough rambling, what did the world's most famous money managers buy and sell last quarter?

Well, as you probably know by now, Dr. Michael Burry is short US stocks and long Japanese stocks:

Hope this isn't a long-term trade:

David Einhorn's Greenlight Capital made money off CONSOL Energy (CEIX) and Tenet Healthcare (THC), but they're hedging for a downturn here:

Zero Hedge decided to make its full 13F summary available for paid subscribers here.

I must be the only schmuck who provides all you this information for free and it really irks me when I have to ask institutions and others here to remember to do the right thing and contribute to incentivize me to continue writing this blog.

As the old movie saying goes, "show me the money!" and please donate using the PayPal options on the top left-hand side under my ugly mug:

I thank all of you who donate and value the work that goes into these comments.

Below, have fun looking into the portfolios of the world's most famous money managers and other top funds.

The links below take you straight to their top holdings and then click to see where they increased and decreased their holdings (see column headings).

Top multi-strategy, event driven hedge funds and large hedge fund managers

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage, merger arbitrage, distressed debt and statistical pair trading. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Appaloosa LP

2) Citadel Advisors

3) Balyasny Asset Management

4) Point72 Asset Management (Steve Cohen)

5) Peak6 Investments

6) Kingdon Capital Management

7) Millennium Management

8) Farallon Capital Management

9) HBK Investments

10) Highbridge Capital Management

11) Highland Capital Management

12) Hudson Bay Capital Management

13) Pentwater Capital Management

14) Sculptor Capital Management (formerly known as Och-Ziff Capital Management)

15) ExodusPoint Capital Management

16) Carlson Capital Management

17) Magnetar Capital

18) Whitebox Advisors

19) QVT Financial 

20) Paloma Partners

21) Weiss Multi-Strategy Advisors

22) York Capital Management

Top Global Macro Hedge Funds and Family Offices

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest across fixed income, currency, commodity and equity markets.

George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson  have converted their hedge funds into family offices to manage their own money.

1) Soros Fund Management

2) Icahn Associates

3) Duquesne Family Office (Stanley Druckenmiller)

4) Bridgewater Associates

5) Pointstate Capital Partners 

6) Caxton Associates (Bruce Kovner)

7) Tudor Investment Corporation (Paul Tudor Jones)

8) Tiger Management (Julian Robertson)

9) Discovery Capital Management (Rob Citrone)

10 Moore Capital Management

11) Rokos Capital Management

12) Element Capital

13) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)

Top Quant and Market Neutral Hedge Funds

These funds use sophisticated mathematical algorithms to make their returns, typically using high-frequency models so they churn their portfolios often. A few of them have outstanding long-term track records and many believe quants are taking over the world. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta. Some are large asset managers that specialize in factor investing.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Cubist Systematic Strategies (a quant division of Point72)

6) Man Group

7) Analytic Investors

8) AQR Capital Management

9) Dimensional Fund Advisors

10) Quantitative Investment Management

11) Oxford Asset Management

12) PDT Partners

13) Angelo Gordon

14) Quantitative Systematic Strategies

15) Quantitative Investment Management

16) Bayesian Capital Management

17) SABA Capital Management

18) Quadrature Capital

19) Simplex Trading

Top Deep Value, Activist, Growth at a Reasonable Price, Event Driven and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management (the one-man wealth machine)

2) Berkshire Hathaway

3) TCI Fund Management

4) Baron Partners Fund (click here to view other Baron funds)

5) BHR Capital

6) Fisher Asset Management

7) Baupost Group

8) Fairfax Financial Holdings

9) Fairholme Capital

10) Gotham Asset Management

11) Fir Tree Partners

12) Elliott Investment Management (Paul Singer)

13) Jana Partners

14) Miller Value Partners (Bill Miller)

15) Highfields Capital Management

16) Eminence Capital

17) Pershing Square Capital Management

18) New Mountain Vantage  Advisers

19) Atlantic Investment Management

20) Polaris Capital Management

21) Third Point

22) Marcato Capital Management

23) Glenview Capital Management

24) Apollo Management

25) Avenue Capital

26) Armistice Capital

27) Blue Harbor Group

28) Brigade Capital Management

29) Caspian Capital

30) Kerrisdale Advisers

31) Knighthead Capital Management

32) Relational Investors

33) Roystone Capital Management

34) Scopia Capital Management

35) Schneider Capital Management

36) ValueAct Capital

37) Vulcan Value Partners

38) Okumus Fund Management

39) Eagle Capital Management

40) Sasco Capital

41) Lyrical Asset Management

42) Gabelli Funds

43) Brave Warrior Advisors

44) Matrix Asset Advisors

45) Jet Capital

46) Conatus Capital Management

47) Starboard Value

48) Pzena Investment Management

49) Trian Fund Management

50) Oaktree Capital Management

51) Fayez Sarofim & Co 

52) Southeastern Asset Management 

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well-known funds.

1) Adage Capital Management

2) Viking Global Investors

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) Tiger Global Management (Chase Coleman)

8) Coatue Management

9) D1 Capital Partners

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Bronson Point Management

16) Hoplite Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Honeycomb Asset Management

27) New Mountain Vantage

28) Penserra Capital Management

29) Eminence Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) Tide Point Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) Suvretta Capital Management

49) Bloom Tree Partners

50) Cadian Capital Management

51) Matrix Capital Management

52) Senvest Partners

53) Falcon Edge Capital Management

54) Park West Asset Management

55) Melvin Capital Partners (Plotkin shut down Melvin after reeling rom Redditor attack)

56) Owl Creek Asset Management

57) Portolan Capital Management

58) Proxima Capital Management

59) Tourbillon Capital Partners

60) Impala Asset Management

61) Valinor Management

62) Marshall Wace

63) Light Street Capital Management

64) Rock Springs Capital Management

65) Rubric Capital Management

66) Whale Rock Capital

67) Skye Global Management

68) York Capital Management

69) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, healthcare, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Avoro Capital Advisors (formerly Venbio Select Advisors)

2) Baker Brothers Advisors

3) Perceptive Advisors

4) RTW Investments

5) Healthcor Management

6) Orbimed Advisors

7) Deerfield Management

8) BB Biotech AG

9) Birchview Capital

10) Ghost Tree Capital

11) Sectoral Asset Management

12) Oracle Investment Management

13) Palo Alto Investors

14) Consonance Capital Management

15) Camber Capital Management

16) Redmile Group

17) Casdin Capital

18) Bridger Capital Management

19) Boxer Capital

20) Omega Fund Management

21) Bridgeway Capital Management

22) Cohen & Steers

23) Cardinal Capital Management

24) Munder Capital Management

25) Diamondhill Capital Management 

26) Cortina Asset Management

27) Geneva Capital Management

28) Criterion Capital Management

29) Daruma Capital Management

30) 12 West Capital Management

31) RA Capital Management

32) Sarissa Capital Management

33) Rock Springs Capital Management

34) Senzar Asset Management

35) Paradigm Biocapital Advisors

36) Sphera Funds

37) Tang Capital Management

38) Thomson Horstmann & Bryant

39) Ecor1 Capital

40) Opaleye Management

41) NEA Management Company

42) Great Point Partners

43) Tekla Capital Management

44) Van Berkom and Associates

Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) BlackRock Inc

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) UBS Asset Management

16) Barclays Global Investor

17) Epoch Investment Partners

18) Thornburg Investment Management

19) Kornitzer Capital Management

20) Batterymarch Financial Management

21) Tocqueville Asset Management

22) Neuberger Berman

23) Winslow Capital Management

24) Herndon Capital Management

25) Artisan Partners

26) Great West Life Insurance Management

27) Lazard Asset Management 

28) Janus Capital Management

29) Franklin Resources

30) Capital Research Global Investors

31) T. Rowe Price

32) First Eagle Investment Management

33) Frontier Capital Management

34) Akre Capital Management

35) Brandywine Global

36) Brown Capital Management

37) Victory Capital Management

38) Orbis Allan Gray

39) Ariel Investments 

40) ARK Investment Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Addenda Capital

2) Letko, Brosseau and Associates

3) Fiera Capital Corporation

4) West Face Capital

5) Hexavest

6) 1832 Asset Management

7) Jarislowsky, Fraser

8) Connor, Clark & Lunn Investment Management

9) TD Asset Management

10) CIBC Asset Management

11) Beutel, Goodman & Co

12) Greystone Managed Investments

13) Mackenzie Financial Corporation

14) Great West Life Assurance Co

15) Guardian Capital

16) Scotia Capital

17) AGF Investments

18) Montrusco Bolton

19) CI Investments

20) Venator Capital Management

21) Van Berkom and Associates

22) Formula Growth

23) Hillsdale Investment Management

Pension Funds, Endowment Funds, Sovereign Wealth Funds and the Fed's Swiss Surrogate

Last but not least, I the track activity of some pension funds, endowment, sovereign wealth funds and the Swiss National Bank (aka the Fed's Swiss surrogate). Below, a sample of the funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) Healthcare of Ontario Pension Plan (HOOPP)

7) British Columbia Investment Management Corporation (BCI)

8) Public Sector Pension Investment Board (PSP Investments)

9) PGGM Investments

10) APG All Pensions Group

11) California Public Employees Retirement System (CalPERS)

12) California State Teachers Retirement System (CalSTRS)

13) New York State Common Fund

14) New York State Teachers Retirement System

15) State Board of Administration of Florida Retirement System

16) State of Wisconsin Investment Board

17) State of New Jersey Common Pension Fund

18) Public Employees Retirement System of Ohio

19) STRS Ohio

20) Teacher Retirement System of Texas

21) Virginia Retirement Systems

22) TIAA CREF investment Management

23) Harvard Management Co.

24) Norges Bank

25) Nordea Investment Management

26) Korea Investment Corp.

27) Singapore Temasek Holdings 

28) Yale Endowment Fund

29) Swiss National Bank (aka, the Fed's Swiss surrogate)

Below, Bloomberg's Su Keenan reports on how big hedge funds piled into big tech names last quarter.

I repeat, do not follow the hedge fund herd in big tech, they're already moving on.

Next, Kari Firestone, Steve Weiss, Josh Brown, and Brian Belski join 'Halftime Report' to discuss seasonal market trends, what to buy amid the current dip, and market headwinds from student loan repayment starting and China's financial woes.

Third, Tom Lee, Fundstrat Global Advisors co-founder, joins 'Squawk Box' to discuss the latest market trends, inflation outlook, the Fed's rate hike campaign, cryptocurrency, and more. Fourth, David Rosenberg, Rosenberg Research founder, says a US recession has been delayed, not derailed. He speaks on BNN Bloomberg on Aug. 17 about his outlook for the economy.

Lastly, Jeremy Grantham, co-founder of the Boston-based investment firm Grantham Mayo Van Otterloo (GMO), predicts a US recession "running perhaps deep into next year." Grantham says we have entered a period of "moderately higher inflation." 

Grantham speaks in an interview taped on August 17th for an upcoming episode of "Bloomberg Wealth with David Rubenstein." 

Rosie and Grantham offer great insights here, well worth heeding their warning.  

Update: On August 29th, Barchart tweets: "Hedge Fund exposure to mega cap tech stocks reaches highest level EVER RECORDED."

Barchart adds: "The average hedge fund exposure to the Magnificent 7 is roughly 20%, the highest level EVER RECORDED according to data from Goldman Sachs."

What can possibly go wrong? You don't need a PhD in Finance to know this will end badly. The amount of herding in mega cap tech stocks is unprecedented this year. And don't kid yourselves, big hedge funds all talk to each other to pull this off.

Well, when the proverbial kick in the tech nuts comes and most of these elite hedge funds switch from buying to selling, don't say you didn't see it coming...

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