November 6, 2015 / 9:50 PM / 2 years ago

UPDATE 1-Big bets on Valeant hit some hedge funds hard in October

(Adds Fir Tree Partners’ assets under management in paragraph 9)

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.

Fir Tree Partners, a $13 billion hedge fund that had about 4 percent of its assets tied up in Valeant at the end of the second quarter, gained 2.2 percent in October as its bets on Interpublic Group of Cos Inc and Avis Budget Group Inc fared well.

Similarly Brenner West, a $1.7 billion hedge fund that listed Valeant as its second-largest position at the end of June, gained 2.7 percent last month.

Jana Partners, which had Valeant as a top 20 position at the end of the second quarter, divested the stock and told investors its flagship fund gained 2.7 percent, shrinking its year-to-date loss to 4.1 percent.

“We started getting rid of our position in Valeant after (Democratic presidential candidate Hillary Clinton) tweeted: ‘Price gouging like this in the specialty drug market is outrageous,'” said a manager at another hedge, requesting anonymity.

Several other managers also said they acted before short-seller Citron published its Oct. 21 accusations.

Viking Global Investors, which owned roughly 1 million Valeant shares at the end of June, gained 1.3 percent last month and is up 5 percent for the year, a source said.

Hedge funds without exposure to Valeant typically rose, as the Standard & Poor’s 500 index gained more than 8 percent, reversing August and September losses triggered by worries about slower growth in China.

The average hedge fund gained 1.71 percent last month and is flat on the year, data from Hedge Fund Research shows.

Eric Mindich’s Eton Park climbed 4.5 percent and is up 9.2 percent, while Tiger Global, gained 8 percent for a 2 percent gain year to date.

Sahm Adrangi’s Kerrisdale Capital climbed 10 percent last month and is up 15 percent for the year. It has publicized several short positions, including one against spectrum holding company Straight Path Communications Inc. (Reporting by Svea Herbst-Bayliss; Editing by Richard Valdmanis, Lisa Von Ahn and Andrew Hay)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below