The Morning Brief: Hedge Funds Rocked by Rite-Aid Crash
Firms including Adage, Highfields, and Greenlight are among the drugstore chain’s largest shareholders.
Shares of hedge fund favorite Rite-Aid crumbled on Thursday, dropping 26.5 percent to close at $2.89, after Walgreens Boots Alliance canceled its planned acquisition of the drugstore chain. Instead, Walgreens will acquire half of Rite-Aid’s stores. Five of Rite-Aid’s ten largest shareholders at the end of the first quarter were hedge funds: Adage Capital Management, Highfields Capital Management, Two Sigma, Greenlight Capital, and Pentwater Capital Management. On the other hand, shares of Walgreens rose more than 1 percent.
Ring out the old ring in the new. While many long-established hedge funds that have had strong reputations for decades have lately suffered from mediocre performance, redemptions, and fee cuts, new funds are apparently thriving. According to a new study from Preqin, so-called first-time funds with a track record of three years or fewer have posted gains of 14.10 percent over the past 12 months. This compares with an 11.91 percent gain generated by a universe of funds Preqin calls first-time funds defined as having less than $300 million in assets. All hedge funds in the data scorekeeper’s universe generated gains of just 10.22 percent over the past 12 months. The funds with track records of three years or less have also easily beaten the other two groups over the past three and five years.
“Emerging hedge funds may be more prone to failure, either due to their strategies being untested through market cycles or as a result of their small size, making them more vulnerable to capital losses,” Preqin states in a new report. “Therefore, investors expect emerging manager hedge funds to generate strong returns in order to compensate for the higher risk that can be associated with investing in them.”
Preqin tracks a total of 14,621 active hedge funds, including 1,759 first-time funds with $300 million or less in assets and 867 first-time funds with a track record of three years or fewer.
Two Sigma Ventures led the $8.5 million financing for Homer Logistics, a food delivery startup. Homer said in a press release it plans to use the proceeds to expand its research capabilities and technical team.
S. Donald Sussman’s Paloma Partners Management disclosed it owns 5.5 percent of Quinpario Acquisition Corp. 2, a special purpose acquisition company that went public in 2015. In January sharholders approved an extension for the date by which it must complete an initial business combination to July 24, 2017. In January Quinpario had also agreed to merger with Source HOV and Novitex Holdings in a deal valued at about $2.8 billion. Quinpario shareholders are scheduled to meet July 11 to approve the deal.