2009 Hedge Fund Rankings: Top 10 Asset Losers ~ market folly

Thursday, April 30, 2009

2009 Hedge Fund Rankings: Top 10 Asset Losers

After covering Alpha's 2009 hedge fund rankings, we thought it would also be prudent to cover the firms who suffered the most in 2009. The top of Alpha's list is full of cream-of-the-crop hedge funds with a boatload of assets under management. Hidden in their annual rankings are also a few hedge funds that while still ranked, they truly had a bad year in terms of amassing AUM. In fact, they didn't amass assets, but rather lost them seemingly with ease. Listed below are the hedge funds that suffered the biggest year over year decrease in capital.

1. Harbinger Capital Partners: Assets -60.8% year over year

2. Atticus Capital: Assets -60% year over year

3. Marshall Wace: Assets -56% year over year

4. GLG Partners: Assets -51.9% year over year

5. Gartmore Investment Management: Assets -51.4% year over year

6. Glenview Capital Management: Assets -50.5% year over year

7. Cantillon Capital Management: Assets -46.8% year over year

8. Citadel Investment Group: Assets -46.4% year over year

9. AllianceBernstein: Assets -46% year over year

10. BlackRock: Assets -45.5% year over year

Now, keep in mind that these decreases in assets could be any combination of poor performance, redemptions, and other circumstances. Barely escaping this list were Thomas Steyer's Farallon Capital Management and Jim Simons' Renaissance Technologies. Farallon saw a 44.4% decrease in assets year over year while Renaissance saw a 39.9% decrease YoY. Interestingly enough, even with such large year over year decreases, they are still both tied for 10th place in the hedge fund rankings, clinging desperately to their coveted place in the top 10.

Philip Falcone's Harbinger Capital Partners and Timothy Barakett's Atticus Capital definitely experienced some of the most severe drops in terms of their ranking from 2008 to 2009. Atticus dropped from being 13th last year to 51st this year. Harbinger, on the other hand, dropped from 16th last year down to 57th this year. While all the funds listed about definitely slipped in the rankings, these two funds saw arguably the most meaningful moves.

Philip Falcone's Harbinger Capital Partners

Curiously enough, Harbinger Capital Partners has been absurdly busy with SEC filings and portfolio re-shuffling. And, this very slippage in assets under management is undoubtedly one of the major sources of the problem. As we've detailed very recently, Harbinger has been decreasing their Cliffs Natural Resources (CLF) position, selling off some of their Calpine (CPN), and is seeing bidders for their NYT stake, among many other portfolio moves. When you run a portfolio concentrated with some big stakes, you're bound to experience volatility. And, couple that with 2008 being the most volatile year in a while and you see just where Harbinger is hurting. When they began selling some of their CLF stake, they issued a statement that they were merely bringing portfolio metrics back in line. With all of the volatility they've experienced, their portfolio has undoubtedly been thrown out of whack. Harbinger's Offshore fund finished -22.7% for 2008. They were up 0.95% for January 2009, 4.64% for February, and +0.74% for March, leaving them at +4.06% year to date as of then. And, we also got word that Falcone would be returning to his roots in terms of investing style and would be opening a new fund. You can view Harbinger's portfolio here.

Timothy Barakett's Atticus Capital

Atticus has had their fair share of scares as well. Way back when the market turmoil started to heat up around September 2008, Atticus' Global fund and European funds were down anywhere from 30-to-40% at certain times. And, as such, they were subject to flying liquidation rumors. However, they did not liquidate and are still very much alive today. We detailed their panic as we saw their portfolio holdings drop massively in terms of assets reported to the SEC. Their portfolio deleveraged from multiple-billions of dollars down to around $500 million. Then, from Q3 of 2008 to Q4 of 2008, Atticus' reported assets (long positions) rose up from $500 million back up to $1.9 billion in Q4. So, they essentially took off a lot of positions and moved to cash to stop the bleeding and to meet any redemptions.

After dealing with their crisis and stabilizing their boat, they began to put money back to work last quarter. Interestingly enough, they mainly moved into Call options on some of the very positions they held common stock in previous to their debacle. (We detailed the portfolio changes in their entirety here). So, after being down as much as 30-40% in 2008, Atticus was hoping for a better start to 2009. In terms of recent performance, we've seen that their European fund was -0.8% for February and sat -10% for 2009 at the end of that month, as noted in our series of January & February hedge fund performance numbers (March numbers here). So, while they have seemingly crawled back from the grave, they are not yet out of the hedge fund graveyard. As always, we'll continue to monitor their situation and recently detailed their sales of some Legend International (LGDI).

Ken Griffin's Citadel Investment Group

Lastly, touching on Ken Griffin's firm, we see that while he slipped in the rankings, he is still within striking distance. His firm fell from 13th in 2008 down to 33rd this year as their assets dropped over 46% year over year. Much of this can be attributed to his flagship funds' poor performance (Kensington and Wellington). In 2008, those funds were down around 55% for the year. Things got so bad that they had to halt redemptions and then subsequently sent out this investor letter regarding their situation. Yet, Griffin seems to have turned Citadel's fortunes around as they were up 5% for January, and up another 2.6% for February (as per our performance numbers list). And, most recently, Kensington & Wellington were +3% in March, bringing them to +11% year to date as of then. And, since those flagship funds won't be seeing performance fees for a while due to poor performance, Citadel has started new hedge funds in an effort to boost their revenues and get a fresh start.

Even through all the trauma, both Ken Griffin and Philip Falcone still find themselves on Forbes' billionaire list. And, for all of the funds listed above, 2008 was a year to forget. While some have started off 2009 on a much better foot, there is still a long way to go.

You can view the performance numbers of various hedge funds in our 2008 performance numbers list, as well as their recent performance in our March performance list. Make sure to also check out the 2009 hedge fund rankings.

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