With US Stock Market Breaking Into New Highs, Top Hedge Fund Performers Focused Abroad

With the US stock market breaking into new highs in September, the HSBC Hedge Weekly performance list continues to have a distinctly Chinese flavor to it. Of the top five hedge fund performers, four are focused on Asian markets, while in the top 20, none of the top performers are focused on the US exclusively. But that doesn’t mean certain US-focused funds are not doing well, you just have to search to find them — and they include some funds that are on a comeback trail, which includes an honorable mention – Larry Robbins’ Glenview Capital Partners.

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While the Long / Short Equity-Diversified Europe category is up 7.06% -- led by the $491 million Antares European Fund,  up 25.38% on the year and up 3.93% in September at the halfway point – the Long / Short Equity Diversified / USA category is trailing at 5.43% year to date.

One of the notable winners in the category is Larry Robbins $4 billion Glenview Capital Partners (Cayman) fund, up 19.17% on the year after having returned 3.37% in August alone. Robbins didn’t make the leaderboard – the lowest year to date performance was 23.39% -- but Glenview Capital Partners has nonetheless significantly bounced back in recent years. In 2015, the healthcare sector in which Glenview Capital Partners significantly invests was beaten up, led by a scandal at Valeant Pharmaceuticals. He created a new hedge fund in October of that year, vowing to recover and do so without fees. Those investors have been rewarded.

In the healthcare space, Joseph Edelman and his $1.9 billion Perceptive Life Sciences Offshore Fund continues to deliver stout returns. The fund is up 21.28% on the year after delivering 1.81% to investors in September only halfway through the month. Edelman, whose fund has a standard deviation of 17.27%, is starting to eclipse his average annual return level of 19.75% with more than three months left in the year.

In the Equity-Diversified / USA category, Mick McGuire’s $97 million Marcato Encore International fund is up a notable 20.93% on the year. Richard McGuire’s $801 million Marcato International fund is up 7.79% on the year, after making near one third that amount in the first half of September, when the fund was up 2.90%.

There have been a number of funds exhibiting strong performance recently.

Xio Song’s $1.3 billion Contrarian Emerging Markets offshore fund was up 4.72% in August, accounting for nearly one-quarter of the credit fund’s 2017 year to date returns. In delivering investors 16.11% on the year, it is almost doubling the strong category average of 9.06% year to date. The fund has a 14.90% annualized return with a relatively low standard deviation of 13.38% relative to the returns.

Notable fund managers in the Macro Diversified / Emerging category that had meaningful August performance were Guillaume Fonkenell and Michael Skarbinski and their $2.9 billion Pharo GAIA Fund, up 4.14% in August and higher by 23.58% on the year -- enough to grab the number 19 spot on the top 20 list. Fonkenell’s $511 million Pharo Trading Fund, up 4.74% on the month, is higher by 21.44% on the year. Both funds are meaningfully performing above the annual returns averages of 15.07% and 11.09% respectively. The relatively low worst drawdowns for the fund, 14.76% and 17.68% respectively, coalesces with relatively low standard deviation, 12.03% and 10.98% respectively, given the returns profile.

Can the US funds make a top 20 showing before the year is out?The stock market might have legs left in it, according to CNBC’s Michael Santoli. He notes that indicators analysts follow are not signaling a major market crash is coming. Leaders of the stock market are not lagging, credit markets do not cause for concern, and volatility isn’t an issue, yet. Volatility typically picks up before a market crash, he notes, while investor sentiment gets more adventurous, both of which are not yet in place.