This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.
This week is 'global macro week' here at Market Folly and we'll be covering some of the equity positions of the major global macro strategy hedge funds. We want to start off this week with a slight disclaimer. Since global macro funds trade all different types of asset classes, they're not an ideal bunch to track or to clone a portfolio from. However, they are some of the smartest minds out there in terms of secular themes, trading, and market timing. As such, we monitor their movements in equities to get a sense as to what sectors they like, when they're moving out of long equity positions, and to see if we can see any secular themes they might be playing. So, this week is not so much about tracking as much as it is about taking a step back and observing the 'bigger picture.'
We've already covered Paul Tudor Jones' hedge fund, and next up we've got Louis Bacon's Moore Capital Management. Louis Bacon comes from the group of "offspring" of the legendary Commodities Corporation. Moore emerged as a successful offspring along with fellow great macro traders Bruce Kovner (Caxton Associates) and Paul Tudor Jones (Tudor Investment Corp). Moore, named after Bacon's middle name, is a $10 billion global macro set of hedge funds. Louis Bacon is a famed trader and risk manager. And, interestingly enough, Bacon helped get his firm off the ground when Paul Tudor Jones stopped accepting capital from investors and instead turned them to Bacon's firm.
Returning 31% annually since inception in 1990, Bacon can be very proud of his flagship fund, Moore Global Investments. But, it doesn't stop there. His returns have shown little correlation to the stock market and low volatility. He is the definition of a risk manager. For 2008, its Global Investments fund finished -4.3%, its Global Fixed Income fund finished +1.3%, and its Emerging Markets Fund finished -17.6%, as noted in our comprehensive list of hedge fund performance numbers. In Barron's 2009 hedge fund rankings, Moore came in 33rd out of the top 100.
Bacon credits his risk management skills to the futures markets, where he learned to be sensitive to market action. And, he learned such skills at an early age. While getting his MBA at Columbia, he used his student loan money to trade. And, he lost it all. Clearly, he learned a lesson he would never forget. Such a lesson stuck with him as he worked various jobs in the financial industry before eventually starting his own firm. And, in his first year managing Moore Capital Management, he returned 86%. Bacon strives to identify long running macro trends. While he has a longer-term macroeconomic view, he won't let that stop him from making money by trading around the position in the mean time. If you want to hear some insightful thoughts from Louis Bacon himself, head over to our post on Hedge Fund manager interviews.
Many successful members of Moore have gone on to start their own funds. For instance, we track Bret Barakett's Tremblant Capital, who learned his trade at Moore. Also, its worth pointing out that Stanley Shopkorn, formerly of Moore Capital, has started his own fund. Additionally, we recently learned that Christopher Pia, another Moore alum will be starting his own fund. But, enough about those who have gone on to do their own thing. Let's check out what Moore has been up to.
Back in December of 2008, we posted up an interesting piece about how global macro funds were returning to their roots and Moore was prominently featured. It will be interesting to monitor Moore's developments going forward as it was displeased with the complexities of its portfolio. In terms of recent performance, we saw that Moore was up 6.3% for 2009 at the end of May in our 2009 hedge fund performances post. Special thanks goes out to Patrick McGowan for assembling the data for this 13F analysis.
The following were Moore's long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.
Some New Positions (Brand new positions that Moore initiated in the last quarter):
Wyeth (WYE), United Technologies (NYSE:UTX), China Mobile (NYSE:CHL), Metlife (NYSE:MET), CMS Energy (NYSE:CMS), Electronic Arts (ERTS) Calls, China Petroleum (NYSE:SNP), Freeport McMoran (NYSE:FCX), Emerson Electric (NYSE:EMR), Monsanto (NYSE:MON), Genentech (Private:DNA) Puts, Caterpillar (NYSE:CAT), EMC (EMC), Citrix (NASDAQ:CTXS), Walmart (NYSE:WMT), Activision Blizzard (NASDAQ:ATVI), Northeast Utilities (NU), Netapp (NASDAQ:NTAP), Riverbed (NASDAQ:RVBD) Calls, Wyeth (WYE) Calls, Cummins (NYSE:CMI), Owens Illinois (NYSE:OI), Joy Global (JOYG), Schering Plough (SGP), & Hess (NYSE:HES) Puts
Some Increased Positions (A few positions Moore had already owned but added shares to)
Lorillard (NYSE:LO): Increased by 606%
Petroleo Brasileiro (PBRA): Increased by 196%
ACE (NYSE:ACE): Increased by 178%
Select Sector Energy (NYSEARCA:XLE): Increased by 133%
Occidental Petroleum (NYSE:OXY): Increased by 100%
Potash (NYSE:POT): Increased by 92%
Some Reduced Positions (Some positions Moore has sold some shares of - note not all sales listed)
PS Wilderhill (NYSEARCA:PBW): Reduced by 70%
Micron (NASDAQ:MU): Reduced by 47% but the position is only 0.46% of Moore's portfolio
Removed Positions (Positions Moore has sold out of completely)
Transocean (NYSE:RIG), Home Depot (NYSE:HD), Lowes (NYSE:LOW), State Street (NYSE:STT), SPDR Homebuilders (NYSEARCA:XHB), Bristol Myers Squibb (NYSE:BMY), Electronic Arts (ERTS), AMR (AMR), Continental Airliens (NYSE:CAL), Philip Morris (NYSE:PM), Whirlpool (NYSE:WHR), Delta Airliens (NYSE:DAL), US Steel (NYSE:X), Exxon Mobil (NYSE:XOM), Lennar (NYSE:LEN), Toll Brothers (NYSE:TOL), Altria (NYSE:MO), Shaw Group (SGR), Hewlett Packard (NYSE:HPQ), Foster Wheeler (FWLT), Stanley Works (NYSE:SWK), First Solar (NASDAQ:FSLR), & Procter & Gamble (NYSE:PG) Puts.
Top 15 Holdings (by % of portfolio)
- Select Sector Energy (XLE) Calls: 18.9% of portfolio
- Select Sector Energy (XLE): 13.3% of portfolio
- Ace (ACE): 8.7% of portfolio
- Select Sector Energy (XLE) Puts: 8.1% of portfolio
- Max Capital (MXGL): 5.1% of portfolio
- Wyeth (WYE): 3.7% of portfolio
- Lorillard (LO): 2.77% of portfolio
- United Technologies (UTX): 2.5% of portfolio
- China Mobile (CHL): 1.8% of portfolio
- Metlife (MET): 1.7% of portfolio
- Powershares Water Resource (NYSEARCA:PHO): 1.5% of portfolio
- CMS Energy (CMS): 1.5% of portfolio
- Electronic Arts (ERTS) Calls: 1.5% of portfolio
- China Petroleum (SNP): 1.4% of portfolio
- Freeport McMoran (FCX): 1.3% of portfolio
Moore has placed a pretty hefty bet on the energy sector. While it has hedged some of its positions with puts, it has a rather large long bias with 18.9% of the portfolio in XLE Calls and 13.3% of the portfolio in XLE shares for a long exposure of 32.2%. That is quite a large bet, even when taking the hedge into account. Then, when you further look at the hedge fund's portfolio, you also see numerous other energy and natural resource plays scattered throughout such as PBR-A, SNP, MON, POT, and more. It's also interesting to note that Moore too joined in on the WYE trade last quarter as it tries to game the event-driven situation there.
As you can see from the massive amount of new positions Moore put on and the large amount of positions it completely sold out of, Moore (and most other global macro firms) move in and out of plays in bigger chunks than most other funds we follow. This is the perfect illustration as to why macro funds are not necessarily the best to track or clone portfolios from. At the same time, these funds can lend us hints as to certain macro themes they are seeing. And, in Moore's case, the hedge fund has shown us a bias towards energy. This is intriguing because just yesterday Paul Tudor Jones was biased towards the financial sector, although it also had a decent sized position in energy via XLE as well.
Assets from the collective holdings reported to the SEC via 13F filing were $787 million this quarter compared to $821 million last quarter, so a slight decrease in long equity assets. Keep in mind also that Moore's equity exposure is just a sliver of its overall global macro portfolio. It is a multi-billion dollar firm and it does not even have $1 billion in long equities. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. We've already covered:
- Gurus such as: Soros Fund Management (George Soros), and Jim Rogers.
- 'Tiger Cub' portfolios like: Andreas Halvorsen's Viking Global, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, Lee Ainslie's Maverick Capital, Shumway Capital Partners (Chris Shumway), Chase Coleman's Tiger Global,
- Outperforming funds like: John Paulson's hedge fund Paulson & Co, Eric Mindich's Eton Park Capital, Raj Rajaratnam's Galleon Group,
- Value and activist funds such as: David Einhorn's Greenlight Capital, Seth Klarman's Baupost Group, Whitney Tison's T2 Partners, Philip Falcone's Harbinger Capital Partners, Ricky Sandler's Eminence Capital,
- Concentrated funds that play secular/macro themes such as: Timothy Barakett's Atticus Capital, Bret Barakett's Tremblant Capital Group, Boone Pickens' BP Capital Management, John Burbank's Passport Capital
- Global macro firms such as: Paul Tudor Jones' Tudor Investment Corp,
- And, newer funds on the scene: David Stemerman's Conatus Capital. Check back each day as we cover new fund portfolios.