World Economy

Big Name Hedge Funds Plummet Again

Big Name Hedge Funds Plummet AgainBig Name Hedge Funds Plummet Again

The pros continued to get clobbered by roller-coaster stocks in September, exacerbating losses from August’s rout.

And the growing trend among hedgies to crowd into the same stocks may have only exacerbated recent declines.

Bill Ackman’s Pershing Square Holdings, which recently make a big splash with a $5.5 billion investment in Oreo-cookie maker Mondelez, dropped 12% in September and is down the same amount for the year, fund performance data shows. David Einhorn’s Greenlight Capital is off by 16.9% for the year after falling 3.5% last month, while Dan Loeb’s reinsurance company, Third Point Re, which is managed by his Third Point hedge fund, fell 4.4% in September and is down 4.2% for the year, the company said.

Losses to big-name hedge fund billionaires follow two months of stock turmoil that has resulted in some of the steepest declines in four years. Triggering the volatility has been dual fears of a global economic slowdown — spurred by troubles in China — as well as concerns over the potential economic impact of rising interest rates.

But hedge funds have also been hurt because they have piled into the stocks that were hit more severely than the broader stock market, a trend known as “crowding.” While the S&P is down roughly 10% for the quarter, a report by research firm Novus shows that stocks with the most hedge fund investors suffered steeper losses in many cases.

For example, pharmaceutical company Valeant saw its stock plunge more than 20% amid scrutiny over massive price increases in certain of its drugs. Shares of the Canada-based drug-maker tumbled on news that Democrats on the House oversight committee have been pushing for subpoenas seeking documents related to price hikes earlier this year of 525% and 212% in two of its heart drugs.

The price hikes occurred on the same day Valeant bought the rights to the drugs.

Pershing has a 5.6% stake in Valeant, according to holding data provided by Morningstar. Another large hedge fund, ValueAct, owned a 4.3% stake as of the end of June. John Paulson’s Paulson & Co. owned 2.6%, the data show. Other hedge funds exposed to Valeant in recent months include Lone Pine and Viking Global.

Other stocks with large losses and a big hedge fund following include Cheniere Energy, which is owned by Icahn Associates, Lone Pine Capital and Viking. That stock was down 22% last month. Hospital company Community Health Systems, which fell 25% last month, also has a big hedge fund following, including Larry Robbin’s Glenview Capital, Richard Perry’s Perry Capital and Highline Capital, Novus reported.

One of the few funds that appears to be bucking the downward trend is Lee Ainslie’s $10 billion Maverick Capital, which was up more than 1% in August, despite the volatility in stocks, bonds and currencies.