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Morning Brief: Ackman’s Pershing Square Narrows Losses

Gains in two of the activist hedge fund firm’s biggest positions helped the firm trim losses in its long-short funds.

  • By Michelle Celarier

Bill Ackman’s Pershing Square Capital Management got a boost late in November, trimming year-to-date losses after two of its biggest holdings, ADP and Chipotle, surged during the last week of the month.

Pershing Square, Ackman’s oldest fund, was down 50 basis points for the year at the end of November, and Pershing Square Holdings, its publicly traded vehicle, cut its losses by 40 percent from earlier in the month and is now down 2.7 for the year. It was up 0.6 percent for the month.

Chipotle, which has been the biggest drag on Pershing Square this year following yet another food safety incident, jumped 11 percent during the last week of November after the company announced it was seeking a new CEO and founder Steve Ells will step aside to become executive chairman.

During the last week of November, ADP also had a big jump. It climbed 4 percent to hit $114 — its highest level since Ackman lost the proxy battle for board seats at the company — on expectations that a tax bill would be passed by Congress. Ackman has said ADP would be a big beneficiary of a corporate tax cut.

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Neil Chriss’s Hutchin Hill Capital is closing shop and returning capital to investors following three disappointing years.

“This decision is not about one year of performance, which has been disappointing,” Chriss wrote in a November 30 letter to investors. “We have not delivered on our performance goals for three years in a row...We fought hard, but did not deliver the performance that you expected from us. “

Hutchin Hill is the latest in a string of recent high-profile hedge fund closures, including Perry Capital, Eclectica Fund, and Eton Capital Management, Chriss started Hutchin Hill in 2007 with a $300 million stake from Renaissance Technologies founder James Simons. He had previously launched the quant strategy at SAC Capital after working with Peter Muller in Morgan Stanley’s proprietary trading group and on Goldman Sachs Asset Management’s quant team.

The $2.3 billion fund was down 4.2 percent through October, after a 4.7 percent gain in 2016 and a loss of 5.2 percent in 2015. At its peak, Hutchin Hill ran $5 billion. It had a net annualized return of about 7 percent since 2008.

Hutchin Hill had branched out beyond Chriss’s quant expertise, but that’s where he says he’ll be focusing his efforts now.

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Credit Suisse is estimating that November will turn out to be a bad month for equity hedge fund managers.

“Underperformance in November is all but guaranteed for equity managers as deal risk in the M&A space and the sector rotations were particularly painful for event and fundamental equity L/S funds respectively,” the Swiss bank wrote in a Dec. 1 global hedge fund bulletin from its prime advisory group.

“Early estimates for equity L/S funds range from +1.0 percent to -2.0 percent while event estimates vary from -1percent to -5 percent. Although we are still compiling estimates for the balance of strategies, we expect quant funds to post an above average month at flat to +1 percent,” Credit Suisse wrote.

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