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Economic Recession is Crushing These 10 Hedge Funds

·9 min read

In this article, we discuss 10 hedge funds that the economic recession is crushing. If you want to read about some more hedge funds that the economic recession is impacting, go directly to Economic Recession is Crushing These 5 Hedge Funds.

2022 has been one of the worst years on record for equity hedge funds. According to data from HFR, a firm that tracks the performance of more than 5,900 hedge funds, equity funds lost close to 8% in the first five months of 2022 amid recession fears. These funds, which manage over $1.2 trillion in assets for clients, had reported losses of only 5.8% in the first five months of 2020, at the height of the pandemic crisis. These losses still compare favorably to the losses of the benchmark S&P 500 over the period, which fell 12.8% as of the end of May 2022. 

Per news agency Reuters, disappointing earnings and worries about aggressive rate hikes, which have led to economic recession fears, are responsible for this drop in performance for hedge funds. The HFRX Global Hedge Fund Index slipped 1% in May, one of the worst months on record for hedge funds as recession fears reached fever pitch, bringing the total losses for the index up to 3.31% in the first five months of 2022. The funds that invested heavily in tech and biotech stocks have been hit the most. 

Some of the top holdings of the worst performing hedge funds of 2022 include Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Thermo Fisher Scientific Inc. (NYSE:TMO). 

Our Methodology

The hedge funds that registered losses in 2022, based on data available with news platforms Reuters and Financial Times by the end of May 2022, were selected for the list. The exact losses are mentioned alongside the top holdings and performance of each fund in 2022. 

Data from around 900 elite hedge funds tracked by Insider Monkey in Q1 2022 was used to identify the number of hedge funds that hold stakes in each top holding of the fund. 

Economic Recession is Crushing These 10 Hedge Funds
Economic Recession is Crushing These 10 Hedge Funds

Source:Pixabay

Economic Recession is Crushing These Hedge Funds

10. Melvin Capital Management

YTD Loss as of March 2022: 21%

Melvin Capital Management is a New York-based hedge fund led by Gabriel Plotkin. In May 2022, Plotkin announced that Melvin was planning to unwind funds and return capital to investors as losses accelerated. In a letter to investors, per CNBC, Plotkin said that the past 17 months had been “incredibly trying” for the firm. Melvin was one of the worst-hit funds from the GameStop short squeeze of 2021. It holds large stakes in several growth stocks that have been battered amid rising rates this year. There are reports that Plotkin will soon start a new fund. 

Gabriel Plotkin Melvin Capital Management
Gabriel Plotkin Melvin Capital Management

One of the top investments of Melvin Capital Management is Live Nation Entertainment, Inc. (NYSE:LYV), a company that offers entertainment services like concerts, ticketing, sponsorship, and advertising, among others. At the end of the first quarter of 2022, 51 hedge funds in the database of Insider Monkey held stakes worth $2 billion in Live Nation Entertainment, Inc. (NYSE:LYV), compared to 46 in the previous quarter worth $2.6 billion.

Just like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Thermo Fisher Scientific Inc. (NYSE:TMO), Live Nation Entertainment, Inc. (NYSE:LYV) is one of the stocks on the radar of elite investors. 

In its Q4 2021 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Live Nation Entertainment, Inc. (NYSE:LYV) was one of them. Here is what the fund said:

“Live entertainment promotion company Live Nation Entertainment, Inc. (NYSE:LYV) has seen strong demand for live experiences as concerts resumed in the U.S. and UK, demonstrating the impact of structural cost savings engineered during pandemic-related shutdowns.”

9. Select Equity Group

YTD Loss as of May 2022: 11%

Select Equity Group is an investment firm based in New York. The hedge fund focuses on long/short equity strategies to generate returns for investors and since its inception in 1990, Select Equity Group has been hugely successful. At the end of the first quarter of 2022, the fund managed a portfolio worth over $30 billion for clients. As the market becomes more volatile amid recession fears, long/short equity funds have suffered steep losses, per Financial Times, with Select Equity among the worst-hit. 

One of the top holdings of Select Equity Group is SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), a firm that provides software products and related services. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), with 14.6 million shares worth more than $1 billion.

In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) was one of them. Here is what the fund said:

“SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the world’s largest hedge fund and private equity administrator. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) provides important, hard-to-replicate services to its end markets, evidenced by its high level of recurring revenues and strong client retention. The company has shareholder-oriented management and a demonstrated track record of growing free cash flow through skillful acquisitions, sales execution and cost discipline.”

8. Pershing Square

YTD Loss as of May 2022: 18%

Pershing Square is an investment firm based in New York. It is led by Bill Ackman, one of the most successful investors on Wall Street, with a personal net worth of close to $3 billion. As inflation soars and interest rates rise, investors have been forced to dump shares of prominent growth stocks for safer bets. Ackman, who was bullish on streaming giant Netflix, has sold-off a more than $1 billion stake in the firm and suffered losses worth $400 million in the transaction. This is primarily why his fund is trading in the red this year. 

Bill Ackman of Pershing Square

Pershing Square still holds a large stake in Netflix, Inc. (NASDAQ:NFLX), a firm that provides entertainment services. Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Netflix, Inc. (NASDAQ:NFLX), with 5.5 million shares worth more than $2 billion. 

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Netflix, Inc. (NASDAQ:NFLX) was one of them. Here is what the fund said:

“We were quite active during the quarter, leveraging volatility to add 10 new names to the portfolio while exiting seven others. Among our new purchases was Netflix in the communication services sector. Netflix, Inc. (NASDAQ:NFLX) is the global leader in the production and distribution of streaming entertainment, operating a high-quality subscription business with room for continued growth in a large addressable market. The stock has faced headwinds due to concerns around subscriber growth. We attribute this recent weakness to COVID-related production delays that have slowed the pace of new shows premiering on the platform and believe Netflix, Inc. (NASDAQ:NFLX) has a strategic advantage in scaling its business given its large content library and lead versus peers in establishing local content studios and partnerships.”

7. North Peak Capital

YTD Loss as of May 2022: 28%

North Peak Capital is an investment management firm based in New York. It is managed by Michael Kahan and Jeremy Kahan. The fund manages a small equity portfolio with just seven holdings valued at over $724 million at the end of the first quarter of 2022. However, all nine holdings are from the growth sector. This has been a huge problem for North Peak in 2022 amid rising rates. All seven holdings of the fund have faced steep losses so far this year ranging from 28% to 60%. North Peak is also thus facing huge setbacks. 

North Peak Capital holds a large stake in Workday, Inc. (NASDAQ:WDAY), the firm that markets enterprise cloud applications. At the end of the first quarter of 2022, 87 hedge funds in the database of Insider Monkey held stakes worth $7 billion in Workday, Inc. (NASDAQ:WDAY), up from 74 in the previous quarter worth $7.1 billion.

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Workday, Inc. (NASDAQ:WDAY) was one of them. Here is what the fund said:

“We believe the weakness created an opportunity for us to add to an exceptionally high-quality payments franchise with an attractive growth and free cash flow profile and little credit or interest rate exposure. It also supported our efforts to maintain diversified IT exposure in a narrowing market; additions to our software-as-aservice (SaaS) holding Workday, Inc. (NASDAQ:WDAY) during the quarter also bolstered this diversification, in which we seek to balance exposure to more widely owned mega cap names…”

6. Third Point

YTD Loss as of May 2022: 32%

Third Point is a hedge fund based in New York. It is chaired by Dan Loeb, a California-born money manager with a personal net worth of close to $4 billion. According to documents sent to investors, per Financial Times, two of the largest funds of Third Point, named Offshore and Ultra, were down 14% and 18% YTD, as of the end of May 2022. The sell-off in tech stocks is the main reason behind this, as Loeb has built up large stakes in many prominent growth stocks over the past few years. 

One of the premier holdings of Third Point is SentinelOne, Inc. (NYSE:S), a firm that operates as a cybersecurity provider. At the end of the first quarter of 2022, 38 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in SentinelOne, Inc. (NYSE:S), compared to 39 in the preceding quarter worth $2.2 billion. 

Along with Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Thermo Fisher Scientific Inc. (NYSE:TMO), SentinelOne, Inc. (NYSE:S) is one of the stocks that hedge funds are buying. 

In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and SentinelOne, Inc. (NYSE:S) was one of them. Here is what the fund said:

“We added six new positions in the fourth quarter. We see next-generation cybersecurity provider SentinelOne, Inc. (NYSE:S), although early in its growth lifecycle, as capable of taking share from legacy players in the antivirus and broader cybersecurity industry.”

 

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Disclose. None. Economic Recession is Crushing These 10 Hedge Funds is originally published on Insider Monkey.