The Morning Brief: Hedge Fund Assets Rise Despite Outflows
Investors redeemed nearly $1.9 billion from hedge funds in April. However, thanks to positive performance, total industry-wide assets still managed to rise last month by $6.86 billion, bringing the total to $2.986 trillion, according to data tracker eVestment.
Several strategies enjoyed positive inflows. For example, commodity funds pulled in $1 billion in April and now have attracted a total of $6.4 billion over the past 11 months. Managed futures funds pulled in another $2.9 billion in April, their third straight positive month of inflows. And even macro strategies received a net $2.7 billion, snapping a five-month redemption streak. On the other hand, investors redeemed $1.1 billion from multistrategy funds in April, the second straight month of outflows.
Shares of hedge fund favorite Microsoft rose 1 percent after the software giant announced plans to cut 1,859 jobs from its smartphone hardware business. As a result, the company said it will take a $950 million impairment and restructuring charge. Microsoft is clearly the largest investment held by San Francisco-based ValueAct Capital Management, which at the end of the first quarter owned more than 56.6 million shares, worth roughly $3.1 billion — or 31 percent of its $10 billion U.S. stock portfolio. Altogether, 162 hedge funds owned shares in the company at the end of the first quarter, making it the fifth most popular hedge fund stock.
Shares of Sarepta Therapeutics surged 26.6 percent to close at $23.35. This is certainly good news for the Perceptive Life Sciences fund, managed by New York–based Perceptive Advisors. That fund posted a 51.8 percent gain last year in part from gains generated by the biotechnology company. But Sarepta Therapeutics stock fell by 64 percent in the first two months of 2016 and more than halved in value in one day in mid-January after the company got bad news from the Food and Drug Administration about a drug for which it was seeking accelerated approval.
On Wednesday, the volatile, heavily-shorted stock inexplicably benefited from the company’s announcement that the Food and Drug Administration is delaying its review of its controversial muscular dystrophy drug. The FDA initially targeted this Thursday for its deadline. The stock is still down about 34 percent for the year. Perceptive itself is off about 13 percent through roughly mid-May.
Starboard Value continues to reduce its stake in Darden Restaurants. The activist hedge fund firm unloaded another 538,000 shares for between $65 and $66 per share, lowering its stake to little more than six million shares. Even more critically, its stake is now at 4.8 percent, which means Starboard no longer needs to report additional timely sales in amended 13D filings.
Shares of activist stock Yahoo plunged more than 5 percent on news about an accounting investigation of Alibaba. The Chinese e-commerce giant accounts for a majority of Yahoo’s value. In late April, Yahoo added four directors as part of a settlement with investor Starboard Value. In a regulatory filing, Alibaba said the Securities and Exchange Commission has initiated an investigation into whether it violated federal securities laws.
The company said the regulator requested documents and information relating to, among other things: its consolidation policies and practices, policies and practices applied to related party transactions in general, and its reporting of operating data from Singles Day. That is a day — specifically, November 11 — when Alibaba holds a high-profile special shopping event similar to Cyber Monday in the U.S. Alibaba said its disclosure is voluntary and that it is cooperating with the SEC. It also said the SEC has informed the company the request for information should not be construed as an indication that any violation of the federal securities laws has occurred.
“This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded,” Alibaba adds in the filing. Shares of Alibaba fell nearly 7 percent on Wednesday. However, it is no longer the big hedge fund stock it was before and shortly after going public in September 2014.