Discovery, Owl Creek Extend Losses Through Mid-OctoberKatherine Burton and Saijel Kishan
Robert Citrone’s $15 billion Discovery Capital Management LLC and Jeffrey Altman’s Owl Creek Asset Management LP extended losses in the first half of this month, amid falling stock and bond markets and a legal decision that sent Fannie Mae and Freddie Mac securities plunging.
Discovery tumbled 11.2 percent in a macro fund this month through Oct. 17, bringing losses since the start of the year to 20.6 percent, according to an investor document viewed by Bloomberg News. Owl Creek lost 9.1 percent this month through Oct. 17 in its main fund and 12.9 percent this year.
Hedge-fund managers were caught off-guard as stock markets slumped in the first to weeks of the month, before rebounding. The Standard & Poor’s Index of 500 U.S. companies has regained more than 7 percent from its intraday low on Oct. 15. Some firms were also hurt when preferred and common shares in mortgage companies Fannie Mae and Freddie Mac tumbled since Sept. 30, when U.S. District Judge Royce Lamberth threw out a lawsuit that would have forced the government to share the companies’ profits with shareholders.
Owl Creek, based in New York with $3.9 billion, was one of last year’s best-performing hedge-fund firms. The firm, along with other hedge funds such as Perry Capital LLC, had invested in Fannie Mae and Freddie Mac speculating Congress or the courts would restore value to the securities.
Jamie Dinan’s York Capital Management LP, posted a 6.6 percent loss this month through Oct. 17, reducing 2014 gains to 1.3 percent.
The recent market rebound has helped at least one firm reduce losses. Bill Ackman’s Pershing Square Capital Management LP fell 0.9 percent through Oct. 21, according to an investor update on its website, after being down 4 percent through Oct. 14. The fund has gained 32 percent this year.
Spokesmen for the hedge-fund firms declined to comment.