00:00Hedge funds posting a strong first half, Loan Pine Capital notching a 43% gain for its investors through June
00:05on long and short bets.
00:07Meanwhile, David Tepper's Appaloosa returning 32% fueled by memory chip sector bets.
00:13Of course, most of that money is his own at this point.
00:15Let's get more with Bloomberg Chief Wall Street Correspondent Sridhar Natharajan.
00:19So what started working for hedge funds that wasn't working in Q1 and previously?
00:24Look, I mean, obviously we had big jitters in Q1, especially with all the geopolitical issues that the markets were
00:29dealing with.
00:29So there has been a clear rebound in broader markets.
00:32But I also feel what we've seen in the back half of this first half of the year, the second
00:37quarter, is effectively that you can see that the smaller hedge funds seem to be more agile and nimble.
00:43When you have these thematic trades dominating the market and you can make these concentrated bets, these funds seem to
00:51be much better positioned as stock pickers than, say, some of the larger, rigidly risk-focused multistrads.
00:57And that's why when you look at the numbers, whether it's at Lone Pine or Tepper or go beyond them
01:02to some of the other names that we've already seen from Whale Rock to Castle Knight, I think Whale Rock
01:06was north of 70%.
01:08You're seeing some really big double-digit gains there, whereas the multistrads are doing good.
01:13But 5% to 10% in an environment when some of the other players are doing so much better
01:17doesn't seem that impressive.
01:18Momentum, though, has taken a really big turn, and it's some of the worst performance for that strategy.
01:24Vani mentioned Millennium, and I wonder how those pod shops tend to perform, because aren't they just big momentum bets?
01:29They essentially correlate around the best performers, and money continues to go to them, and the things that don't perform
01:33well, they lose their money.
01:35So how do they perform in an environment like this where you have this incredible market shop?
01:39Look, I think their biggest selling pitch is that, irrespective of the direction of the market, you can be assured
01:44that they will be eking out some gains.
01:46And even when they have down years, it will not be terrible.
01:50Which, again, back to our earlier point, when you have these concentrated thematic trades, you can't see the big pod
01:55shops file in into your second derivative AI plays, into your memory chip makers and whatnot,
02:01into the picks and shovels trade, like the smaller hedge funds have been doing.
02:04So they can't reproduce the same kind of returns.
02:06But at the same time, they can still flex their muscles, as we saw with Millennium and the pods that
02:12are focused on index rebalancing,
02:14when you're talking about these mechanical developments where you can make a big leverage play,
02:19knowing when the index has to add and remove names, anticipating that, front-running those trades,
02:25because you know those changes are going to happen and make a lot of money.
02:28And that's why two pods at Millennium ended up making $3.7 billion in the month.
02:31Well, they picked the right companies, right?
02:32Because you never fully know which ones are going to be the ones that enter.
02:35Sri, were there any really surprising trades, be they macro trades or even micro trades that weren't, like, semiconductor trades
02:41or energy trades?
02:42I actually want to focus on Tepper because the most interesting thing that stood out for me in those results,
02:47in the Appaloosa results,
02:48were up 32% in the first half.
02:51Big success with the second derivative plays, so that's focusing on these memory chip makers like Samsung and Micron and
02:56SK Hynix and whatnot.
02:57But at the same time, the most stunning stat here is Tepper was 40% in cash.
03:03To use a bad poker analogy, clearly knowing when to fold your hand and stay on the sidelines when you're
03:08not sure about something,
03:09and really sizing up when we're convinced about something.
03:12And that's how half the portfolio played out, and the other half was on the sidelines.
03:15Sri, thank you so much.
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