This content is from: Portfolio

The Morning Brief: Horseman Rides High

Russell Clark’s Horseman Global Fund, managed by London-based Horseman Capital, is cashing in big-time on the market’s decline. The hedge fund, which we have highlighted afewtimes in the past, has been able to outperform a large number of its peers even though it has been net short for several years.

Now is the fund’s chance to shine especially brightly, and it is. The fund is already up 7.59 percent this month through Wednesday, August 19, and is up 15.80 percent for the year. It also posted gains ranging from around 12.7 percent to 19 percent in each of the previous three years. Entering 2015, Clark was net-short equities and long bonds. His fund’s net-short position was roughly 50 percent.

Horseman, which has been net short for the past few years, has been aggressively betting that interest rates would continue to fall, which some saw as a flawed contrarian long bet. About 60 percent of Horseman’s assets were invested in bonds in late 2014. A big portion of that 60 percent was in 30-year U.S. Treasuries, a position Clark established at the beginning of 2014 and aggressively built up as the year progressed.

Good move. Last year Clark made almost all of his money in long bonds as interest rates fell. It will be very interesting to see how he fared in the past three days.

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The Lyxor Hedge Fund Index was only down 0.3 percent for the most recent week ending August 18. Of course this period does not capture the increase in selling in the final three days of the week. The event-driven group of funds was flat for the weekly period but down slightly for the month. It is up 1.4 percent for the year. On the other hand, global macro was the big loser for the week, dropping 1.2 percent thanks to the negative developments in China, causing losses in their U.S. dollar positions. The rough period also reversed what started out as a strong month. Even so, the strategy is still up 4.3 percent for the year. Long-short equity is up 4.2 percent for the year after posting a slight loss the most recent week thanks to “conservative positioning and strong alpha generation,” according to a weekly report. The more interesting report will be the one for the week ending this Tuesday.

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Bank activist Lawrence Seidman, founder of Parsippany, New Jersey–based Seidman & Associates, fired off a letter to Suzanne DeFerie, president and CEO of ASB Bancorp, calling on the company to put itself up for sale and to appoint him to the board. He adds he has already been approached by parties that may be interested in buying ASB.

In the letter, Seidman said the board and senior management “have not earned the right” for the firm to remain independent “due to its poor financial performance during their extended tenures.” On April 1, Seidman disclosed he owned 5.89 percent of ASB, the parent company of Asheville Savings Bank, which has 13 full-service banking centers in North Carolina. It has a market capitalization of $104 million, up about 25 percent since Seidman initially disclosed his holding. In the letter, the investor cited the “abysmal” results in the bank’s July 31 earnings release, including its very low return on average assets and return on average equity.

“In view of the opportunities that exist, your reluctance to enter into serious merger discussions with potential buyers only reinforces my view that you and the others on ASBB’s board are more interested in retaining their personal rewards than trying to fulfill their fiduciary duty to the ASBB shareholders and maximize shareholder value,” Seidman states in the letter.

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Harvard’s endowment manager, the Harvard Management Company, named to its board of directors Joshua Friedman, co-founder of Los Angeles-based Canyon Partners, and Jeremy Stein, a former Federal Reserve Board governor. Friedman is a Harvard alum while Stein is a Harvard economics professor who earlier this year became a consultant to hedge fund firm BlueMountain Capital Management.

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