Popular Funds Disappoint

Lackluster as 2012 was for hedge funds as a whole, it was worse

Old Guard Exits Changing Industry

Chidem Kurdas

Caxton Associates’ founders Bruce Kovner and Peter D’Angel issued the latest in a series of retirement letters by well-known hedge fund managers. Exiting managers give different reasons for their decision, but in the main they’re tired of dealing with at least one of three temperamental forces—-

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Gold May Pan Out, Silver Doubtful

Chidem Kurdas

There probably was a mini bubble in silver, by far the highest returning commodity of the past year. A bubble has been suspected in gold, too.  George Soros’s funds reduced gold exposure—as we at HedgeFundSmarts were the first to report, back in March.  But many hedge funds continue to hold precious metals companies or ETFs.

Larry Kantor, managing director and head of research at Barclays Capital, makes a key point about these markets. There is so much sentiment involved in precious metals that prices can’t be understood in terms of supply and demand, he says. Recently the price of gold went up apparently because of the metal’s role as safe haven  amid  Middle Eastern political turmoil and the European debt crisis.

Gold will struggle to go higher, according to Francisco Blanch, head of global commodities at Bank of America Merrill Lynch Global Research.

Soros Down on Gold?

Chidem Kurdas

Nowadays you don’t hear talk of a gold bubble, even though the metal is still at the near-record highs reached this week. The notion that the steep rise of the past year is sign of a bubble was a hot topic just  months ago.

But between political unrest in the Middle East and the earthquake-tsunami-nuclear threat in Japan, gold once more looked like a safe haven. Of course, it will likely take a downward correction once the geopolitical events appear less threatening. How good an investment is gold now?

Individual Commodities Diverge Widely

Chidem Kurdas

Barclays Capital finds that investors are increasingly moving to differentiated commodity strategies, away from the broad-based index exposures that many previously favored. The outlook is greater diversity between markets, says Kevin Norrish of Barclays Capital.

Energy Exploration Attracts

A number of hedge funds have invested in companies that look for oil and gas or acquire properties with proven reserves. Among the favorites is Plains Exploration & Production Company but big producers like Exxon Mobil continue to attract investors as well.

Paulson Stays with Gold

That is, NovaGold, the Canadian gold mining company that Paulson & Co. bought into early this year while launching a gold fund. Despite widespread talk of an expanding gold bubble, Paulson & Co. continues to own between 9% to 10% of NovaGold.

Debt Managers Go Public, Goldman Underwrites

Chidem Kurdas

Secured business loans is a hot investment area. That probably helped MCC Advisors, a hedge fund that makes direct loans, to go ahead with its plan to float a fund on the New York Stock Exchange. The initial public offering is expected to raise $185 million to $212 million, to make loans of $10 to $50 million to small and medium businesses.

Carry Trade and Tech: Barclays, BofA

Chidem Kurdas

Analysts parsing market prospects have come up with different investment ideas. You see this among both banks and hedge funds. Barclays Capital’s outlook for the third quarter highlights divergences between countries.

Barclays head of research Larry Kantor notes that there may be more of a carry trade in the next few months. He says markets will bounce back near term but the easy money has been made in the first year of economic recovery and now it’s more difficult.

The people at Bank of America Merrill Lynch Global Research are more optimistic about US stocks. David Bianco, head of US equity strategy, says technology stocks offer low-hanging fruit with little risk, while financial shares promise strong returns. He sees foreign markets as the growth engine, with export-oriented companies doing well.

Comac Attracts FoFs

Chidem Kurdas

In recent months a couple of large funds of funds allocated to London-based Comac Capital, a global macro manager that has established a solid track  record in the past five years. One fund of funds invested $100 million with Comac, which has grown to around $5 billion in assets.