Irony of the ghastly hedge fund stock bear market
By Neil Behrmann
February 08 – Those hedge fund managers who touted themselves as market-defying magicians are failing to beat the bear market.
In January this year, two-thirds of the funds reporting to Barclays’ database lost money - and the market is losing confidence in their so-called skills.
Illustrating investor concerns, hedge fund listed companies are among the worst performers in global stock markets.
A year ago, Fortress Investment Group was listed on the New York Stock Exchange when global equities were in the final stage of the bull market. Investors piled into Fortress at the IPO price of $18.50 - and continued to pile in after listing, pushing the stock up to $37.
Other hedge fund and private equity firms were encouraged to follow suit with IPOs. The most notable were Blackstone, Och Ziff and Gottex, while GLG gained a New York listing via a reverse takeover.
From its high point last year, the Dow Jones industrial index has fallen 14 per cent, while the S&P 500 is down 15 per cent. But Man Group, which manages more than $70 billion, is the only hedge fund stock that has performed in relative terms, declining less than the Dow.
The rest of the funds have been mauled by a big daddy bear market, with Fortress losing two thirds of its value and Blackstone more than half. These companies have done the worst, since a substantial proportion of their business comes from private equity and real estate funds. Och Ziff, which listed later in 2007, also has a sizeable private equity business.
The bubble has imploded for private equity and real estate, and rumours abound that latecomer investors in these funds are heavy losers.
It is an anomaly that pure hedge fund plays such as RAB, Polar Capital, Gottex and Charlemagne have fared so poorly, as hedge funds - other things being equal - are supposed to do relatively well in market downturns. RAB fared worst as it is estimated to have lost more than £50 million($100m) from a failed investment in the nationalised British bank, wreck, Northern Rock.
When hedge fund firms were listed last year, cynics claimed the founders were selling stock at the peak of the bull market. So far the cynics have been proved right. The founders have made buckets of money. And the investors? Yup. you guessed it.
Hedge Fund Stocks head south
Stock/symbol |
IPO Price |
2007 High |
2007/8 Low |
February 19 |
|
Fortress /FIG |
18.5 |
37.0 |
10.5 |
1265 |
-66% |
Blackstone/BX |
30 |
38.0 |
17.3 |
16 |
-58% |
RAB |
25.0 |
126 |
66 |
66 |
-48% |
Polar Capital/POLR |
190 |
264 |
147 |
150 |
-43% |
|
|
|
|
|
|
Gottex |
73 |
73.2 |
36.6 |
44.5 |
-41% |
Och Ziff/ OZM |
32 |
32.8 |
20 |
21.6 |
-34% |
Charlemagne/CCAP. |
100.0 |
83.0 |
52.5 |
58.3 |
-30% |
GLG |
---- |
15.0 |
10.8 |
12.5 |
-17% |
Man Group/ EMG |
----- |
640 |
440 |
580 |
- 9% |
change from 2007 highShare prices in US dollars, but Man, RAB, Polar and Charlemagne are priced in pence and Gottex in Swiss francs. GLG’s high and low are from the beginning of November when reverse takeover of Freedom was approved.
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