Balyasny, a $12 billion hedge fund that's trailing its peers, is ramping up for a critical few weeks

REUTERS/Ralph Orlowski

A trader reacts in front of his screens at the Frankfurt stock exchange March 16, 2015. Germany's DAX was up 1.9 percent at 12,133, a record level on Monday.

• Balyasny, a $12 billion hedge fund, has been ramping up for the earnings season, when companies report their quarterly results.
• The firm has struggled of late to put up strong numbers, and previously told clients that earnings are the big catalysts they'll need to get right "because that is when dispersion is most likely to occur."
• The firm's funds gained 2.7% and 3.8% this year, lagging hedge fund peers.

Balyasny, a $12 billion hedge fund, is ramping up for earnings season - and has a lot on the line.

The Chicago-based firm has posted slight gains this year but is still losing to competitors, according to a September client letter seen by Business Insider.

The Chicago-based firm's Atlas Global fund gained 0.24% in September, bringing its year-to-date performance to 2.16%. The Atlas Enhanced fund gained 0.41% in September, bringing its year-to-date performance to 3.78%.

Those are slight gains for Balyasny. At mid-year, the firm's Atlas Global was close to flat while the Atlas Enhanced fund was up 0.78%, Business Insider previously reported. Still, Balyasny is lagging competitors. The HFRI Fund Weighted Composite Index gained 5.7% this year through September.

Over the summer, founder Dmitriy Balyasny told clients that the stock market was challenging traditional stock pickers. In the letter, which was reported by Business Insider, he said that rise of passive investing, quant funds and a surge in hedge-fund assets had made the stock market more efficient, leaving fewer easy money-making opportunities.

"We think the challenges, consolidation, and changes in the industry are due to one main factor: There isn't enough alpha to make everyone happy," Balyasny said in the earlier letter.

A spokesman for Balyasny didn't respond to a request for comment.

Earnings catalysts

In the summer letter, Balyasny also said that the rise of passive investing had given increased importance to certain catalysts, such as earnings releases. Earnings are "extremely important to play - and play correctly - because that is when dispersion is most likely to occur," Balyasny wrote at the time.

Balyasny added: "We believe that as we continue to scale up deployment and enter summer earnings season, returns should improve back to our target range," Balyasny said.

In a September letter to clients reviewed by Business Insider, Balyasny says it is now ramping up for earnings season. "We are identifying fresh, variant ideas on both the long and short side," Balyasny wrote, adding:

"We are keeping an eye on the upcoming elections in Japan, the stand-off with North Korea, the possible selection of a new Fed chairman, and U.S. tax reform legislation as potential catalysts for shaking up the low volatility environment. "

Earnings season is just kicking off, with more than 200 companies due to report earnings on Thursday and Friday.

Quick gains

The September letter indicated that Balyasny's investment picks typically delivered a big chunk of their returns within a month of a position being initiated, but that the firm was also posting gains on positions it had held for a month or longer.

"Year-to-date, 48.4% of our alpha has been made within one month of initiating a position," Balyasny wrote in the September letter. "While most of the alpha has been generated in first month, the 1-3 month bucket has improved considerably as the stock picking environment continues to normalize this year."

Performance in the Atlas Enhanced fund was driven by bets in the tech and consumer spaces, he added.

Balyasny managed $12.6 billion as of the start of the year, according to the HFI Billion Dollar Club ranking.