Carl Icahn’s private hedge fund cut its losses in the third quarter. But it remains in the red.
The octogenarian’s publicly traded investment firm, Icahn Enterprises, reported a 7.6 percent gain in its investments segment in the September three-month period. Even so, it remains down 1.9 percent for the year. This means Icahn lagged the S&P 500 by about 23 percentage points in the first nine months of 2024. Last year, the investments segment lost 16.9 percent, compared with a 26.3 percent jump for the S&P 500, including dividends reinvested — a lag of 40 percentage points.
Notably, Icahn has been bailing out of his own hedge fund. As of September 30, the value of investments in the investment funds made by Icahn and his affiliates was about $1.5 billion. In July 2024, the funds issued a pro rata distribution of $650 million in cash, including $256 million to Icahn and affiliates.
Meanwhile, Icahn and his affiliates redeemed $250 million from his personal interests in the investment funds during the nine months ended September 30, 2024. In 2023, Icahn redeemed $2 billion from his personal interests in those funds.
In the third quarter, long positions kicked in 10.4 percent to performance and shorts detracted 4.4 percent. Gains in the long book were driven primarily by the health care and utilities sectors. Losses in the short book came mainly from losses from the materials and utilities sectors as well as from broad market hedges. They were offset by increases in the energy sector.
For the first nine months of the year, Icahn’s Investment portfolio was down 1.9 percent, propelled by a 9-percentage-point loss from the shorts. This was offset by a 3.3 percent contribution from longs and a 3.8 percent boost from unidentified positions.
In the most recent quarter, losses from shorts year-to-date were driven mainly by broad market hedges and materials sectors. They were offset somewhat by gains from the energy sector. Increases in the long book came mostly from the utilities sector, partly offset by net losses in the energy sector.
Icahn has long been bearish, reflected in the portfolio’s sizable net short exposure. However, this has been changing in recent quarters.
At the end of September, the investment funds had a net short notional exposure of just 2 percent: 113 long, mostly in equities, and 115 percent short, stemming from being 92 percent short equity, 20 percent short credit, and 3 percent short commodities.
Of the 113 percent long exposure, 58 percent was made up of the fair value of the long positions and 55 percent mostly of single-name equity forward and swap contracts.
Of the 115 percent short exposure, 63 percent was from the fair value of the short positions and 52 percent came mostly from short broad market index swap derivative contracts, short credit default swap contracts, and short commodity contracts.
As of the end of June, the investment funds had a net short notional exposure of 16 percent — the lowest level in some time.
