The trades that killed hedge funds in 2015

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Activist investor Bill Ackman (R), chief executive of Pershing Square Capital, speaks with specialist trader Michael Cacace, at the post where Valeant Pharmaceuticals International Inc. is traded on the floor of the New York Stock Exchange November 10, 2015. REUTERS/Brendan McDermid

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Activist investor Bill Ackman, chief executive of Pershing Square Capital, speaks with a specialist trader on the floor of the New York Stock Exchange

It has been a horrible year for the hedge fund industry.

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The average hedge fund is down 3.72% this year, according to Hedge Fund Research.

And there have been numerous highly publicized hedge fund closings and redemptions in 2015.

Stan Altshuller, the cofounder and chief research officer of hedge fund data firm Novus, put together the trades that soured 2015 for many hedge fund portfolios.

  1. Interest rate hike (now finally getting it right) long USD and short term Treasury yields
  2. Large Macro bets (trends that didn't last) lead to a few macro fund closures: China slowing growth, global demand slow down.
  3. Bad bets on energy, as oil slid and commodities fell. Also bad bets on individual companies within energy (Cheniere - LNG, SunEdison - SUNE, Oasis Petroleum - OAS)
  4. Crowded long/short equity bets in Healthcare, Discretionary, Industrials and Technology sectors all but destroyed certain funds returns
    1. Health: Valeant (VRX), Community Health Systems (CYH), Sanofi (SNY)
    2. Consumer: Loral Space (LORL) and Sears (SHLD)
    3. Energy: Cheniere (LNG), SunEdison (SUNE)
  5. High yield credit is getting hurt as yields are blowing out. This actually creates opportunity long term, unfortunately some funds cannot stay liquid long enough to profit from them.

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