Davidson Kempner, one of the largest hedge fund firms in the world, is betting big on mega-deals
Davidson Kempner's International fund, which manages about $8.7 billion, gained 4.08% this year through the end of June, according to a client document reviewed by Business Insider. That's for the fund's Class C Tranches 3 & 4 and Class D Tranches 1 & 2.
That compares to a 3.5% gain in the HFRI Fund Weighted Composite Index over the same period. The fund returned 7.1% last year, compared to a 5.4% gain in the index.
The firm's big strategies include merger arbitrage, which makes up about 30% of the portfolio's long positions and 8.5% of the shorts, and distressed investing, which makes up about 39% of the longs and 0.5% of the shorts.
Here are the fund's top five long positions, which includes several mergers, according to the July-dated note:
- NXP, Qualcomm (merger arbitrage): 6.4% - Qualcomm has bid $110 per share for NXP Semiconductors in a bid valued at $47 billion. However, NXP is currently trading at $113, suggesting investors expect Qualcomm to up its offer. Activist investor Elliott Management has disclosed a 6% stake in NXP.
- Reynolds, BAT (merger arbitrage): 5.1% - British American Tobacco in July completed its acquisition for the remaining 57.8% of Reynolds American it did not already own.
- Lehman Brothers (distressed): 4.3% - Davidson Kempner has long had positions in distressed Lehman Brothers assets.
- Time Warner/AT&T (merger arbitrage): 2.3% - AT&T announced a deal last year to buy Time Warner in a $85.4 billion deal.
- Lehman Brothers - LBIE (distressed): 2.3%
Davidson Kempner is the 11th largest American hedge fund firm by assets, one notch ahead of Citadel and two below Baupost Group, according to the HFI Billion Dollar Club ranking from the start of this year. Davidson Kempner managed $27.6 billion firmwide as of July 1, according to the client document.
Most of the fund's long and short positions are in North America, at 54% and 10% respectively.
A spokesman for the firm declined to comment.