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Morning Brief: Credit Suisse Says Long-Short Funds Lagged in September

Equity long-short funds increased their exposure to banks last month, according to a Credit Suisse report.

Equity long-short hedge funds gained an estimated 50 basis points to 100 basis points in September, a reflection of modest underperformance among their popular longs and shorts in an otherwise strong stock market, according to a new report from Credit Suisse Group’s prime services risk advisory team. By comparison, the Standard & Poor’s 500 index rose 1.93 percent last month.

Equity long-short hedge funds entered September up 9.6 percent, according to the Credit Suisse report. The firm said that since a low in March, their gross exposure has risen to about 30 percent, from 17 percent, on “market moves.”

The funds increased their exposure to banks in September. “U.S. financials exposure is now above weight for only the second time since the 2008 liquidity crisis, December 2016 being the first,” Credit Suisse said in the report. Long-short funds’ gross exposure to energy equities remained underweight across every strategy, even as managers of macro/commodity trading advisor funds pushed their net long exposure to crude to a three-year high, according to the report. Equity long-short funds slightly reduced their exposure to technology in September, though it remains much higher than it was one and a half years ago.

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Bill Ackman’s Pershing Square Capital Management, which has started a proxy fight with Automatic Data Processing, is planning a webcast for shareholders in order to make the case for voting for his pick of ADP board directors. The activist announced Monday that Pershing will host a live webcast for all shareholders on October 10 at 7 p.m. in New York on the website www.ADPascending.com. “The October 10th webcast will be held in the evening to give all shareholders – particularly retail shareholders and other individual investors – a chance to understand the significant opportunity for improvement at ADP,” Pershing said.

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Shares of Och-Ziff Capital Management surged Monday 14.6 percent to close at $3.69, the day before the firm’s expected release of September results and asset flows. The stock is now up more than 70 percent from its late April low.

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Shares of Valeant Pharmaceuticals International rose 2 percent to close at $14.62 Monday. They are now back in the black for the year, albeit slightly. The drug company’s shares have been extremely volatile throughout the year.

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