Bridgewater Associates founder Raymond Dalio is bullish on the economy — sort of. “It’s a good environment,” he said, speaking at the New York Times DealBook Conference on Thursday, adding that he still has investments in U.S. stocks. But he seemed concerned about what could happen in a year or two when the “effectiveness of monetary policy will be less,” according to CNBC’s account of Dalio’s remarks.
“Whenever there might be a need for easing of monetary policy, we’re going to be in a situation in which the effective ability to ease is very limited,” he told the audience. “And that’s at the same time that asset prices will be comparatively high.” So far, so good, though, he hedges, noting that we are in the middle part of a cycle, which he called “the easy part, the good part.”
We earlier reported that in the third quarter, Dalio’s Bridgewater Pure Alpha Fund II lost 4.5 percent, while the Bridgewater Pure Alpha Major Markets II lost 3.7 percent. As a result, their gains for the year were cut, to 2.9 percent and 8.9 percent respectively, according to an investor in the funds. The Westport, Connecticut-based hedge fund firm suffered the bulk of its losses in commodities and some currency pairs, according to the investor.
___
Paul Singer’s Elliott Management Corp. boosted its stake in Family Dollar Stores to 6.8 percent, according to a regulatory filing. On October 17, the New York-based, sometime-activist firm nominated seven individuals to the board of directors of the discount retailer. In Thursday’s filing, Elliott said it agreed to pay each of the seven nominees $25,000 in cash once Elliott submits a letter to the company nominating them as a director and another $25,000 in cash after Elliott files a proxy statement. Other major hedge fund holders as of the end of the third quarter were New York-based Soroban Capital Partners; Greenwich, Connecticut-based Lone Pine Capital; New York-based Jana Partners; and New York-based Glenview Capital Management.
___
Here is further proof that investors are not feeling as warm and fuzzy toward hedge funds as in the past. According to Chicago-based industry tracker Hedge Fund Research, 240 new funds were launched in the third quarter, the fewest number in a three-month period since the third quarter of 2013. Meanwhile, 814 new funds have been launched year-to-date, much fewer than the 1,058 for the trailing four-quarter period, but in line with the full-year total of 1,060 in 2013. However, keep in mind that 2013 produced the lowest number of launches since 2010.
Meanwhile, 200 hedge funds liquidated in the third quarter, up from the previous quarter. However, this was fewer than the 222 that shuttered in the year-ago quarter. However, over the trailing 12 months, 957 funds liquidated, which was more than in each of the prior four years and the highest total since 2009, when 1,023 funds shut down, according to HFR.
___
In other news from HFR, there is no doubt that 2014 is shaping up to be a mediocre year for hedge funds. The average hedge fund is up just 3.73 percent for the year through November, as measured by the company’s HFRI Fund Weighted Composite Index. The average equity hedge fund is up just 2.64 percent, according to HFR.
While the performance is worse than in 2013, at least the dispersion of results — the difference between the best and worst performers — has narrowed. I guess misery is enjoying a lot of company. According to HFR, the top decile, or 10 percent, of performers gained 28.84 percent on average in the trailing 12 months. But this was down from a gain of 41.6 percent in the top decile in 2013. By the same token, the funds in the bottom 10 percent of performers lost, on average 13.37 percent over the past 12 months. This was much better than the loss of 18.93 percent recorded by the bottom decile in 2013.
___
Was Starboard Value’s purchase of its stake in Staples, and additional shares of Office Depot, leaked on Wednesday? The stock of the two companies rose 2.5 percent and 2.7 percent, respectively, ahead of news that the New York-based activist hedge fund firm was about to disclose that it owned 6 percent of Staples’ stock and that it boosted its stake in rival Office Depot to 9.9 percent.
In addition, from December 2 through December 8, Staples’ trading volume ranged between 20 percent and 80 percent above its average for the past three months, while on Tuesday and Wednesday it spiked to more than double the average daily volume. Office Depot’s volume on Wednesday was more than double its three-month average. As for the two investments, so far Starboard only says it believes the two stocks are “undervalued” and represent “an attractive investment opportunity.” It concedes it has no plan for the companies at this point. But remember, last year Starboard also pushed for Office Depot’s merger with rival OfficeMax.
___
Shares of electronic health-care records provider Athenahealth surged more than 11 percent after the company provided 2015 revenue guidance on Wednesday that was more or less in line with Wall Street forecasts. Remember, this is the first of the so-called “bubble stocks” that Greenlight Capital’s David Einhorn disclosed he was shorting back in the spring. In fact, since December 2 alone, the stock is now up nearly 14 percent.
In a note to clients on Thursday, Deutsche Bank repeated its $163 price target and Buy rating, stating in a note: “While the revenue growth is below our expectation and at midpoint slightly below the Street, we believe it was largely in-line with recent investor expectations.” In a separate note published Wednesday morning before the guidance was disclosed, DB expressed surprise that investor sentiment was “fading” heading into Thursday’s analyst meeting. “We have been struck by the bearish tone and reduced expectations of both investors and other analysts heading into Thursday’s event,” DB stated.
___
Kenneth Griffin’s Citadel raised its stake in Francesca’s Holdings Corporation, a chain of retail boutiques, by 4.5 times, to 2.23 million shares, or 5.3 percent of the total outstanding. The Chicago-based hedge fund firm also boosted its stake in C&J Energy Services by about 900,000 shares, to more than 2.8 million shares, or 5.1 percent of the fracking services company.
