This content is from: Portfolio

Morning Brief: Investors Eager for New Event-Driven, Relative Value Funds

Equity strategies are losing popularity as investors grow wary of market valuations.

  • By Stephen Taub

Investors seem to be cooling on equity-oriented hedge funds. There were 74 hedge fund launches in the first quarter, according to a new report from Preqin, 89 percent of which were single-manager hedge funds. Interestingly, the percentage of the new funds that employ an equity strategy fell to 28 percent of the total, the second straight quarterly decline. Equity strategies accounted for 32 percent of total launches in the fourth quarter of 2017 and 37 percent of the total new launches in the third quarter, according to Preqin.

“This may indicate that fund managers’ outlook for equity strategies aligns with the views of many investors,” Preqin states in its report. The firm points out that a recent survey of investors found that 45 percent think we are at the peak of the equity cycle. Rather, event-driven funds’ proportion of new launches surged to 21 percent in the first quarter, up from 6 percent the previous period and 9 percent in the third quarter of 2017. There was also a surge in the share of relative value funds, to 17 percent in the recent quarter from 8 percent in the fourth quarter of 2017, 9 percent in the third quarter of last year, and just 6 percent in the second quarter of 2017.

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Chase Coleman’s Tiger Global Management led a $17 million Series A round of financing for Green Bits, which offers a management and automated compliance platform to help cannabis dispensaries and retailers run their businesses, according to the company. The new round of financing boosts Green Bits’ total outside funding to $19.3 million. “We are honored and excited to have Tiger Global join our team,” said Ben Curren, co-founder and chief executive officer of Green Bits, in a press release. “We have grown quickly in a short period, and this new capital will allow us to exponentially accelerate our growth. Our goal is to be in every state that has legalized cannabis in some way.”

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Adage Capital Partners said in a regulatory filing that as of April 11, it owned 2.225 million shares of AveXis, or 6.04 percent of the clinical-stage gene therapy company. We don’t know how many shares the hedge fund owned at the end of the first quarter, but at year-end it owned slightly fewer than 1.5 million shares. In a 13D filing, Adage said it acquired the shares for investment purposes in the ordinary course of business “and not with the purpose nor with the effect of changing or influencing the control or management” of the company. It explained that it filed a 13D because it believed it may not be eligible to file on a 13G. It engages in investment strategies that include merger arbitrage and event-driven strategies. Meanwhile, earlier this month, AveXis agreed to be acquired by Novartis.

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Boaz Weinstein’s Saba Capital Management said that as of April 12 it owned 5.99 percent of Nuveen Connecticut Quality Municipal Income Fund, a closed-end mutual fund. The stock is trading at close to a 14 percent discount to its net asset value (NAV). In recent years Saba has been aggressively pushing for closed-end funds to take some sort of measures to narrow or close their NAV discount.

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