The very thing that saved him from undergoing heinous losses may hold him back now, as markets set to move higher.
Loeb, whose fund lost just 1.5% last year, announced on Friday that he’s taken in a lot of equity shorts to hedge against the downward action.
A renewed focus on generating alpha on both sides of the portfolio has led us to increase single-name equity shorts by four-fold over the past year. Our total equity short exposure is nearly $4.5 billion today,” Loeb wrote in a letter to clients dated February 12 and seen by Reuters.
Loeb, whose $17.5 billion hedge fund has delivered an average return of 16.2 percent a year over the last two decades, did not mince words in his assessment of tumbling markets.
“The indices’ drastic declines actually fail to capture the true carnage revealed when you take a closer look at the breadth of S&P companies experiencing massive losses,” he wrote.
A hedge fund that actually hedges? Amazing.
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Fly, with your knowledge of the industry, how common is it being short about 25% of managed funds (excluding any leverage that isn’t common knowledge)?
What would you estimate to be the average or median % of managed funds to be short among some of the big money managers? Appreciate your insight as always.
That’s a little larger than average. His funds size makes everything harder.
Thanks for the response. There are old Baupost letters floating around the internet that gave some of the best transparency into Klarman’s holdings and how he hedges. Awesome stuff.
Jeffries is bullish in new coverage of the listed hedge fund space. Dan Loeb can both select and manage shorts better than me from my perch. $17.5bln AUM but entry ticket is $10mm direct. TPOU.L listed avenue on LSE is a closed end fund version. Heady discount to NAV, not liquid but you can leg in with patience as I am doing. Throws off a nice dividend (high 6’s) to boot which is deemed return of capital given discount to NAV (near 17%). Me likey. Disclosure: Long 1/3 of target exposure via TPOU.L.