Big bets on Valeant hit some hedge funds hard in October

Fri Nov 6, 2015 3:04pm EST
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By Svea Herbst-Bayliss

BOSTON Nov 6 (Reuters) - Concentrated bets on Valeant Pharmaceuticals left some hedge funds nursing heavy losses last month when the industry darling's stock price tumbled nearly 50 percent.

Nehal Chopra's Tiger Ratan, which had more than 20 percent of its assets in Valeant at the end of the second quarter, lost 9 percent in October, according to two people familiar with the fund's performance.

The loss is one of the biggest the hedge fund industry has seen yet for the month and pushes the popular manager's portfolio further into the red. A spokesman was not immediately available to comment.

Hound Partners, which had a 15 percent position in Valeant at the end of the second quarter, dropped 7.1 percent in October, leaving the roughly $4.5 billion fund flat for the year to date, the two sources said. The firm was not immediately available for comment.

The losses are larger than a previously reported decline of 6 percent to 7 percent at William Ackman's Pershing Square Capital Management, which owns 21.4 million Valeant shares and ranks as the second-biggest owner. Pershing Square is down 19 percent for the first 10 months of the year.

Valeant's stock price dropped 47 percent in October after short-seller Citron Research accused it of improperly inflating its revenue. Valeant Chief Executive Officer Michael Pearson has denied the allegations, and Ackman has publicly supported him since then.

Valeant's plunge also pressured other pharmaceutical and healthcare companies, which hurt investors like Larry Robbins' Glenview Capital. Glenview lost 2.3 percent last month, leaving the fund down 14.8 percent for the year.

October was not bad for all hedge funds with Valeant bets, however. Several managed to post gains, possibly by exiting or trimming the stock, or as other holdings in their portfolios rose, investors said.   Continued...