As Rival Hedge Funds Close, This London Short Seller Returned 20%

  • Return for the $867 million fund is best for seven years
  • Fund has allocated most money to short bets since 2012

Horseman Capital Management’s biggest hedge fund gained 20.4 percent in 2015, with long running bets that stocks would drop paying off as global equity markets declined.

The $867 million Horseman Global Fund, managed by Russell Clark, returned 5.6 percent in December, helping it recover from an 8.7 percent loss in October. The performance for 2015 marks its best annual gain in seven years, according to a newsletter sent to investors and seen by Bloomberg News.

Horseman’s strategy bolstered the firm during a torrid year for the hedge fund industry, with the HFRX Equity Hedge Index retreating 2.2 percent and the MSCI World Index of stocks declining 2.7 percent. London-based Clark has allocated most of his money to short bets since 2012 and told investors in October that he was sticking to his approach. Shorting involves selling borrowed securities and buying them back at lower prices.

“As anyone who has been to a speed-dating night can attest, losers are common. In fact they are everywhere,” Clark wrote in the December newsletter. “While in the dating world, losers are to be avoided, here at Horseman Capital we love losers.”

A spokesman for Horseman Capital confirmed the contents of the newsletter and returns but declined to comment further.

Poor performances by equity long-short hedge funds failed to deter investors, who poured a net $31.5 billion into them in the first 10 months of last year. That accounted for almost 42 percent of the cash placed with money managers, according to data from Eurekahedge.

Winning bets

The fund made money last year by shorting companies in areas such as the U.S. pipeline industry and placing long bets on firms including Rheinmetall AG, Banca Popolare di Milano Scarl and Costco Wholesale Corp., all part of its top-10 holdings at the end of November, according to the investor letter.

When the global financial crisis wiped hundreds of billions of dollars from equity markets in 2008 and the HFRX Equity Hedge Index lost almost 27 percent, Horseman’s global hedge fund returned 31.3 percent.

Horseman Capital managed about $2.6 billion at the end of November. The Horseman Global Fund had a net equity short position of 66 percent, meaning the fund invested more money in stocks forecast to fall in value rather than those expected to rise.

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