The Morning Brief: Spooked by Momentum Stocks, Coatue to Slim Down

Philippe Laffont’s Coatue Management is the latest high-profile hedge fund to return some money to clients, CNBC reported. The Tiger Cub, who has hitched a lot of his success to high-flying media, tech and Internet stocks, is apparently spooked by the recent large selloff among these momentum stocks.

He told clients in a recent investor letter he plans to return as much as 35 percent of the $7 billion or so in his main hedge fund, according to a Bloomberg report. “The move was as sudden and deep as some of the gut-wrenching dislocations of 2000-2002 and 2008-2009,” he said in the letter. “We are not smart enough to know if this rotation is just a pullback or will lead to a deeper and more protracted contraction.” He also told clients he does not want to become an asset gatherer. “We believe the right size for Flagship is $5 billion,” he said, according to CNBC. “Coatue lost money on both sides of the portfolio: long and short. We have dealt with tough markets in the past, however. We are confident that we have the ideas and risk management to navigate this environment.”

James Levin, head of global credit and executive managing director at Och-Ziff Capital Management Group — one of the only publicly-traded hedge fund firms — made about $119 million last year, according to the company’s proxy. Virtually all of the compensation came from stock awards. David Windreich, head of U.S. and European investing, took home $11.7 million while Zoltan Varga, head of Asian investing, picked up $10.5 million.

A new survey by eVestment found that hedge funds with less than two years of track record (rebalanced annually) outperformed funds with two-to-five-year records and so-called “tenured” funds, those with more than five years of track record. The survey covers the period from 2003 through 2013. The survey also found that the percentage of large funds that are tenured rose from 61.7 percent in 2003 to 78.35 percent in 2013. “At no point in the last 11 years have both large and tenured funds accounted for as large a proportion of the overall industry as during 2013,” eVestment states. “Funds are launching larger and growing more quickly.” On the other hand, the percentage of small, young funds has declined every year since 2004, from 94 percent to 77 percent in 2013.

Kenneth Griffin’s Citadel disclosed it owns nearly 3.2 million shares of discount chain Five Below, or 5.9 percent of the total outstanding stock. It owned about 780,000 shares at year-end, plus put and call options on the stock.

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