This content is from: Portfolio

The Morning Brief: Discovery’s Robert Citrone Turns Pessimistic

Macro specialist Robert Citrone is feeling bearish. In one of his recent weekly emails to clients, the Tiger Cub and founder of South Norwalk, Connecticut-based Discovery Capital Management says the market is in the midst of a correction that will likely persist over the next three to four months. He says this market reversal will be “the largest correction since the 2008 crisis.” Citrone reassures investors that unlike the steep, painful recession in 2008, however, this correction “will be more of a healthy adjustment from overvalued market levels, which are primarily a result of exceptionally easy monetary policies.”

In the email, initially reported by Bloomberg, Citrone attributes the correction to the market’s realization that the extended period of monetary easing is coming to an end. “There are additional, separate catalysts — political and economic risks — percolating,” he adds. “The culmination of these happening at roughly the same time could accelerate and exacerbate the adjustment in asset prices.”

Citrone had been having a rough time of late. One of his funds, Discovery Global Opportunity, was off 0.60 percent last year and down 5.2 percent in 2014. It was also down 5.9 percent in the first quarter of this year. However, all of the firm’s funds are now up for the year, according to a person with knowledge of their performance.

___

Investors plunked down $6.3 billion in new money into the hedge fund industry in August, according to a new report from eVestment. This brings total industry-wide assets to just slightly above the $3 billion mark. Even so, year-to-date the industry has suffered total net outflows of $51.8 billion.

Commodity funds took in $2.73 billion, their largest monthly inflow since August 2009. Managed futures funds pulled in $4.17 billion in August, bringing the total for the year to $20.31 billion.

“However we continue to see dislocation from positive sentiment within the large, archetypal managed futures fund segment,” eVestment adds in its report. On the other hand, macro strategies suffered net redemptions for the third consecutive month, including a net outflow of $3.42 billion in August. “While dissatisfaction with prior year returns has been a factor, we have begun to see elevated redemptions from products which performed reasonably well in 2015, but have underperformed in 2016,” eVestment adds.

___

UBS raised its price target on hedge fund favorite Adobe Systems, from $122 to $130, adding that this “may still be conservative.” The investment bank thinks the stock could reach $150 if earnings come in ahead of its expectations. In a note to clients, UBS cites strong results in all of the software giant’s cloud products.

At the end of the second quarter, at least 70 hedge fund firms held a position in the stock, according to Goldman Sachs. Greenwich, Connecticut-based Lone Pine Capital is the largest hedge fund manager, although the stock does not rank among the top-ten U.S. longs in its portfolio. Hedge funds that do include Adobe among their top-ten holdings include New York-based Darsana Capital Partners, New York-based Suvretta Capital Management and Greenwich, Connecticut–based Conatus Capital Management.

___

Shares of hedge fund favorite Charter Communications surged 3.75 percent, to close at $274.46, on Wednesday. The cable and broadband giant is now up about 50 percent for the year. At the end of the second quarter, at least 68 hedge funds included the stock among their top-ten holdings, more than any other stock except for Amazon.com, according to Goldman Sachs. It was also held by at least 19 hedge fund firms with roots in Julian Robertson, Jr.’s Tiger Management, according to portfolio intelligence platform Novus.

Related Content