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Argentiere Capital’s Returns, AUM and Holdings

Jelena Martinovic

Deepak Gulati's Argentiere Capital is a Zug, Switzerland-based hedge fund launched back in June 2013, with an additional office in Chicago. The fund is focused on offering its services to pooled investment vehicles and manages separate client-focused equity portfolios. It’s run by a team of former members of JP Morgan's Global Equities Proprietary Trading Group under the guidance of Mr. Gulati, who was the Global Head of that group from 2008-2012. Prior to that, Mr. Gulati was responsible for global risk management for the entire European Proprietary Trading Group from 2005.

After obtaining a B.S. in Finance from the University of Virginia, McIntire School of Commerce, in 2000, his first stop was Archelon, where he worked as an equity derivatives market maker. Mr. Gulati was a Senior Equity Derivatives Trader at Dresdner. Currently, he is Argentiere Capital’s Chief Investment Officer and Chief Executive Officer.

Argentiere Capital's Returns, AUM and Holdings

Argentiere Capital is a multi-strategy fund, with a focus on liquid equity markets across the globe. The fund's portfolio positions are grouped around different investment strategies in order to find the best opportunity among various equity products. For instance, there's its volatility strategy, with a focus on taking advantage of structural inefficiencies, dislocations, imbalances and distortions caused by different conditions such as political, macroeconomic, technical, etc., by utilizing implied volatility relationships between foreign exchange rates and interest rates as well as individual equities and/or equity indices. Then, there's a quantitative long/short equity strategy built around uncovering market anomalies and inefficiencies in liquid equity markets with the goal to exploit them by using quantitative techniques and statistical analysis.

The foreign exchange strategy is focused on G10 currencies, aiming to profit from both predictable pricing relationships between multiple assets as well as trend-following or going long in an uptrend and short in a downtrend, meaning it's both relative value and directional strategy. The fixed income & credit strategy capitalizes on volatility anomalies and distortions triggered by liquidity shifts, policy disruptions, macroeconomic environment, and supply/demand shocks. Besides trading in U.S, European and Asian sovereign and investment grade credit, the strategy consists of trading in G10 interest rates through interest rate derivatives, as well.

To sum up, the fund "focuses on volatility" and "betting on the rate at which stocks rise or fall," as William Daley, the Ex-Obama Chief of Staff and the former U.S Commerce Secretary under President Bill Clinton, has said. Back in 2014, Mr. Daley joined the fund as the head of its U.S operations and as a managing partner. However, by betting on rising market volatility, the fund has been losing money for years, erasing all of its gains since inception, as evidenced by the performance of its funds.

For example, the last five years were quite challenging for its Argentiere Master Fund Ltd Class fund. In 2013 that fund returned 1.16%, followed by 2.15% in 2014. The biggest return, of 3.81%, was recorded in 2015. Unfortunately, 2016 was down year for the fund, with it having lost 7.32%. The following two years weren’t prosperous for the fund either, since it lost 4.60% in 2017 and 1.39% in 2018, through October 29. The fund’s worst drawdown was 16.70.

While the years of calm markets took their toll on Argentiere Capital, it seems like the long-expected return of market volatility hasn't helped him to recover those losses either. Nevertheless, Mr. Gulati sees light at the end of the tunnel, especially after the October stock market turmoil. As of November 2018, Argentiere Capital managed around $1 billion of assets of pooled investment vehicles on a discretionary basis.

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On September 30, Argentiere Capital’s 13F portfolio was valued at around $978 million. The fund made some significant changes to its portfolio during the third quarter, adding 42 new positions and dumping around 25 companies. It's quite interesting that among the stocks in the fund’s portfolio are some of the 25 Most Popular Stocks Among Hedge Funds, such as N X P Semiconductors NV (NASDAQ:NXPI), a Dutch global semiconductor manufacturer. Even though billionaires are crazy about it, the fund actually decreased its stake in the company by 87% during Q3, leaving it with only 30,000 shares worth $2.56 million.

More about the fund’s most noteworthy investment moves during the third quarter are discussed on the next page.

Among the newcomers to Argentiere Capital's portfolio during Q3, we have to mention the fund's $1.9 million position in Express Scripts Inc (NASDAQ:ESRX), which consists of 20,000 shares. Apparently, now may be a good time to invest in the largest pharmacy benefit management organization in the U.S. As of September 30, the company occupied just a small 0.19% slice of the fund's 13F portfolio.

Meanwhile, one of the positions the fund decided to boost during the third quarter was its stake in Biomarin Pharmaceutical Inc (NASDAQ:BMRN), a California-based biotechnology company. While the company has faced declining interest from hedge fund managers, Argentiere was not one of them, boosting its stake in Biomarin by 12% during Q3, to 39,200 shares worth $3.8 million.

Argentiere Capital slightly decreased its stake in oilfield services company Halliburton Co (NYSE:HAL) during the quarter, by 13%. At the end of Q3, the fund owned 192,515 shares valued at $7.8 million. In addition, a number of hedge fund managers are concerned whether Halliburton is the right investment to pursue these days, as there has been a rapid decline in hedge fund ownership of the stock over the past year.

The fund substantially lowered its stake in Clovis Oncology Inc. (NASDAQ:CLVS) in the third quarter, slashing the size of its holding in the biopharmaceutical company by 72% to 20,000 shares worth $587,000. That is again consistent with other fund managers, which have been dumping Clovis in large quantities for several quarters.

The biggest holdings that Argentiere Capital decided to cut from its portfolio by the end of Q3 were AT&T Inc (NYSE:T) and HP Inc (NYSE:HPQ), as it sold off its all of its shares of those stocks, 10,000 and 14,930, respectively.

Disclosure: None. This article was originally published at Insider Monkey.