The Morning Brief: Funds Finally Outperform the Major Indexes

This is shaping up to be the first year since the bull market began that hedge funds outperformed the widely followed indexes. The Chicago-based HFRI Fund Weighted Composite Index fell 1.87 percent in August compared with losses ranging between 6 percent and 7 percent for the main benchmarks. Through August, the HFRI index was up 0.2 percent compared with a 2.87 percent loss for the Standard & Poor’s 500, and that assumed one includes dividends reinvested. Although August was the worst monthly performance for hedge funds since May 2012, the composite index outperformed the S&P 500 by more than 4 percentage points in August and 3 percentage points for the year-to-date. So far, so good.

Drilling down by strategy, HFR’s macro index fell 1.2 percent in August, “with mixed declines across constituent sub-strategy areas as volatility spiked across equity, commodity, currency, emerging markets and fixed-income assets,” according to a press release. Indexes tracking discretionary (people making investment decisions) and currency funds only slightly lost money, declining by 0.2 percent and 0.1 percent, respectively. The HFRI Macro: Multi-Strategy Index declined by 0.3 percent, the Commodity Index fell 0.95 percent while the HFRI Macro: Systematic Diversified/CTA Index fell by 1.9 percent (see story). Event-driven strategies fell by 1.7 percent. “Many deal spreads widened, with losses in high beta strategies only partially offset by market neutral exposures,” HFR points out. ___

Chalk this up as another win for Nelson Peltz’s Trian Partners. Pentair, based in Worsley, Greater Manchester, U.K., said it plans to expand its board by one director at its 2016 annual meeting and appoint Ed Garden, chief investment officer and a founding partner of the New York-based activist hedge fund. Until the next annual meeting, Garden will be permitted to attend and participate in all meetings of Pentair’s Board in a non-voting capacity. “The move follows a series of collaborative discussions between Pentair and Trian,” said the manufacturing company in a press release. Trian owns 7.2 percent of the stock, making it one of Pentair’s largest shareholders. “We believe the addition of Ed to our board would bring a shareholder’s perspective and we look forward to benefiting from his insights and Trian’s strong analytical work,” said Randall J. Hogan, Pentair’s chairman and CEO, in a statement. Adds Garden: “Pentair has created significant shareholder value over the past 14 years since Randy Hogan became CEO and has the potential to generate significant additional value for its shareholders in the years ahead.” ___

Shares of surged more than 5 percent after the embattled hedge fund favorite announced plans to repurchase up to $1 billion worth of its American depositary shares (ADS) over the next 24 months. Three Tiger Management descendants were among the top-10 holders at the end of the second quarter, led by New York-based Tiger Global Management, Greenwich, Connecticut-based Lone Pine Capital and Greenwich, Connecticut-based Coatue Management. Before Tuesday, the stock was down about 33 percent this quarter. ___

New York-based Senator Investment Group disclosed it nearly doubled its stake in Realogy Holdings Corp. to 7.5 million shares, or 5.12 percent of the total outstanding of the real estate broker. ___

Falcon Edge Capital boosted its stake in Pandora Media by about 150 percent, to 11.6 million shares or so, or 5.5 percent of the total. Pandora was only one of 16 U.S. stocks held at the end of the second quarter by the New York firm, headed by Richard Gerson, previously a founding executive at John Griffin’s New York–based Blue Ridge Capital.