AlphaClone

Clone vs. Fund: Third Point Capital Q3 2010

Every time I read a hedge fund investment letter I can't help looking up the manager's clone to compare performance.  I think more than anything else - our "clone vs fund" comparisons really drive the point home about how effective our investment approach can be.  This time around, our friends at Market Folly publish Dan Loeb's latest investment letter.   The firm's Offshore fund returned 19.2% YTD to the end of Sepetember 2010 and has returned 18.2% annualized since inception vs. 5.1% for the S&P500 (no dividends, exact inception date not given in the letter).  How has his Top 10 Holdings clone performed? 

• 18.4% YTD to September 30, 2010
• 24.5% YTD to December 27, 2010
• 10% annualized since 2000 vs. 0.5% for the S&P500 (w/dividends).
  

 

Hedge Funds vs. Their Clones

Interesting article on the Market Folly blog today which runs down the year to date performance on several prominent hedge funds.  We thought it would be interesting to compare the actual performance of the fund as listed in the blog article with the fund's Top 10 Holding's clone performance.

John Burbank's Passport Capital: The San Francisco firm is now up 7.8% for the year while its clone is up 8.2% (to 10/10/10).  

John Paulson's hedge fund Paulson & Co: the firm's Recovery fund up 7.5% YTD while its clone is up 7.8% on the year.  

David Tepper's Appaloosa Management: their Palomino fund is up 15.13% for the year while its clone is up 14.8% YTD. 

Paul Tudor Jones' Tudor Investment Corp: their flagship Global BVI fund is up 2.6% for 2010 while its clone is up 5.6%.

David Einhorn's Greenlight Capital is up 4.2% thus far in 2010 while his clone is up 6.9% year to date.

Bill Ackman's Pershing Square: his flagship fund is up 6.5% for the year while his clone is up a whopping 21.9% year to date.

Dan Loeb's Third Point: their offshore fund is up 19.1% thus far in 2010 while their Partners fund is up 22.2%, their Ultra fund is up 19.9%, and their Qualified fund is up 18.1%.  Third Point's clone is up is up 15% year to date.  

Och-Ziff Capital Management: Their flagship fund is now up 4.18% YTD while his clone is up flat at 0.8%.

Nelson Peltz's Trian Partners: this activist hedge fund was up 7.5% for September.  Market folly doesn't report on the fund's year to date performance but his clone is up 11.6% so far for the year.

Barry Rosenstein's JANA Partners: another activist fund, JANA is now up 4% for 2010 while the fund's clone is up 15.2% - almost four fold the performance of the actual fund.

Richard Perry's Perry Partners: The fund is down -0.04% for last month but up 11.17% for 2010 while its clone has returned 13.2% so far this year.

All of the above hedge funds and hundreds more can be tracked for free on AlphaClone - just sign up as a guest member here to take advantage of our new plans and pricing and the new free features you can access.

Priceline Inc. [PCLN], Cablevision [CVC] and CF Industries Holdings [CF] Top Most Popular Mid-Cap Stocks on AlphaClone

Priceline Inc. [PCLN], Cablevision {CVC] and CF Industries Holdings [CF] are the three most popular stocks in the $5 billion to $10 billion market cap size category this quarter.  AlphaClone's Cap Picks fund group for mid cap stocks is one of the best performing multi-holding group clones year-to-date.  The group's Top 10 Popularity clone invests quarterly in the ten most popular mid cap stocks that are also amongst the largest twenty positions across AlphaClone's hedge fund universe.  The clone is equal weighted, rebalanced quarterly, and has returned 22.4% so far this year vs. 6.2% for the Russell 2000.  Since 2000, the clone has returned 50% vs. -2.6% for the index.  Below is a performance graph as well as the clone's performance in each year since 2000 vs. the Russell 2000.

 

Clone vs. Fund: Maverick Capital (Update)

Back in August we wrote the first in a series of articles that compared the actual performance of a hedge fund with one of its clones.  The article in August focused on Maverick Capital and compared the performance of the actual fund to the performance of AlphaClone's Maverick Capital Top 10 Holdings clone.  The analysis went as far back as July 2002 and showed the clone returning 6.87% annualized vs. 6.79% for the actual fund (7/02 to 8/09)

This morning, Dealbreaker.com, one of our favorite blogs, published Maverick's latest investor letter.  The letter summarizes the ten year performance to 12/31/2009 of Maverick's main fund, Maverick Fund, and several of its variants including; Maverick Neutral and Maverick Long.  We thought it a great opportunity to update our comparison using a longer time horizon - ten years.  This time we take Maverick's Top 20 Holding clone and compare the long only, 50% hedged and 100% hedged versions of the clone with the actual performance of Maverick's corresponding variant.  I think Meb Faber said it best when he sent me the numbers in an email this morning.... "BAM"!!

Berkshire Hathaway: Clones vs. Stock [BRK.A, BRK.B]

With its acquisition of Burlington Northern, Berkshire Hathaway will now replace its acquisition target in both the S&P 500 and S&P 100 indexes.   There’s no doubt that had you bought a share of Berkshire on the first day of the year in 2000, you would be a very satisfied investor today.  The company’s class A/B shares returned roughly 100% since then (see graphs).    The S&P 500 had a total return of negative 6%. 

 

Buying the company’s shares means you are exposing yourself to two things; a) the company’s operating businesses (historically primarily insurance) and b) the public market investment prowess of  Warren Buffett and Charles Munger in deploying the insurance company’s “float” (i.e. the cumulative net between insurance premiums collected and insurance claims paid less a reserve).   But what if you didn’t want exposure to the company’s operating businesses?  What if instead, you simply wanted exposure to the company’s public equity investment portfolio (i.e. excluding debt and derivatives)?   Well of course that’s exactly what you get when you invest in AlphaClone’s Berkshire clones. 

We thought we’d take a look at how the Berkshire’s clone portfolios faired against the performance of the company’s shares over the past ten years.  The results are interesting – both the Berkshire Top 10 Holdings clone and the Berkshire Ten Best Ideas clones outperformed the company’s stock:

• The Top 10 Holdings clone, which simply holds the company’s ten largest equity positions each quarter, equal weighted, long only, returned 118.5% at 15.5% annualized volatility (slightly lower than the market)

• The 10 Best Ideas clone returned 171.8% at 18% annualized volatility (slightly higher than the market). You can find a description of the Best Ideas clone strategy in our glossary.