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The Morning Brief: Hedge Funds Post Paltry Gain in Q1

How bad was the first quarter for hedge funds? Well, according to Preqin, hedge funds posted their worst results for the first three months of a year since 2008, rising just 1.23 percent. This compares with gains of 6.07 percent and 3.76 percent in the first quarter of 2012 and 2013, respectively. In fact, February was the only profitable month in this year’s first quarter. Event driven was the best performing strategy in the period, posting average returns of 2.94 percent, while macro strategies gained, on average just 0.51 percent.

While we recently noted that long-short equity funds that favor high-flying momentum stocks were hurt by their short positions last year and undermined by their longs in the first quarter, investors continue to pour money into the strategy. There was “a significant increase” in searches for the strategy in the first quarter, according to Preqin, which noted that 68 percent of fund searches initiated during the period included a long-short equity component. This was up from 49 percent in the fourth quarter of last year. There was also a rise in the proportion of searches targeting both event driven and managed futures/CTA vehicles, Preqin notes. On the other hand, demand for long/short credit, equity market neutral and fixed income arbitrage strategies fell.

William Ackman’s Pershing Square Capital Management continues to reduce its stake in Beam, which earlier this year agreed to be acquired by Suntory for $83.50 per share in cash. In a new regulatory filing, the New York hedge fund firm disclosed it unloaded another 2.5 million or so shares in just the past few days, lowering its stake in the spirits maker to 5.5 percent of the total shares outstanding.

Alan Howard’s BH Macro Fund, managed out of his London-based firm Brevan Howard Asset Management, is down nearly 1 percent this month through April 11, extending its loss for the year to 3.81 percent.

Two high-powered hedge fund honchos have made sizable contributions to a super-political action committee launched by Ameritrade founder Joe Ricketts, whose aim is to help elect Republicans to Congress, according to Bloomberg, citing a Federal Election Commission report. Paul Singer, president of Elliott Management, donated $350,000 to the Ending Spending super-PAC, while Baupost Group, founded by Seth Klarman, gave $450,000. According to the report, the Baupost contribution should have been noted in the filing’s disclosure that it came from Klarman personally and not from the company. Ricketts’s son Todd and his three siblings are majority owners of the Chicago Cubs. Singer and Klarman, however, are not hard-line Republicans when it comes to social issues. In the first quarter, Singer gave $1.75 million and Klarman $1 million to American Unity PAC, a super-PAC that is calling on Republicans to support same-sex marriage.

Singer, Third Point founder Daniel Loeb and Citadel founder Ken Griffin and his wife, Anne Dias Griffin, the managing partner of Aragon Global Management, each contributed between $500,000 and $525,000 to the Republican Governors Association.

Shares of hedge fund favorite Google fell about 5 percent or so in after-hours trading after revenues, earnings and other metrics came in below Wall Street expectations.

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