Bill Ackman versus Paul Britton.
It’s a classic matchup between two hedge fund managers who manage billions of dollars for their clients and have prospered tremendously from the seven-year bull-run.
The latest 10% correction’s put the spotlight on the investment performance of professional money managers such as Ackman and Britton, some of which is out of this world while other results leave a lot to be desired given the handsome fees earned by hedge fund managers.
Ackman, probably best known for his $1 billion bet against Herbalife, is having a dreadful year through the end of August. Ackman reported to clients August 26 that the 10.1% year-to-date gains for Pershing Square Capital, his publicly traded investment vehicle, through the end of July were erased and then some in 16 days of trading.
Ackman was rather matter of fact in his Wednesday update to clients.
"There has been significant volatility in the investment markets over the past few weeks, largely driven by the decline of the Chinese stock markets, and the fear that slowing growth in China will have repercussions for businesses around the world,” wrote Ackman. "At the date of this report, the year to date investment performance has been erased, and the Company is at a loss position for the year."
Contrast that with the performance of Britton and his firm, Capstone Investment Advisors, who manage $3.6 billion for wealthy clients and institutions.
Britton’s funds focus on volatility. They do well when the markets are especially turbulent. August as been the perfect storm for Capstone. Buying insurance against a market crash when it’s cheap [crash unlikely] and then selling that insurance when it’s expensive [crash likely] is how Britton and other funds like it make money.
One of Capstone’s funds manages $600 million using this strategy. It’s up a whopping 55% in August. A bigger fund that invests $3 billion is up 1.2% in August compared to -5.8% for the S&P 500 through August 26. The results have shock advisors and other industry players.
At least for now, Britton is clearly winning the battle. But like the funds he manages, things can change in a hurry.