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Bearish views abound at elite hedge fund conference
[PALM BEACH] Hedge funds are starting the year off negative.
Professional money managers gathered at an elite Morgan Stanley investment conference in Palm Beach, Florida this week expressed a range of pessimistic market views, including so-called bearish takes on the energy sector, China, and stocks such as Valeant Pharmaceuticals and SolarCity.
Paul Tudor Jones, the billionaire head of hedge fund firm Tudor Investment Corp, said during a panel discussion that he is negative on commodities, including crude oil, according to people who heard the remarks.
Mr Jones, whose firm invests based on macroeconomic trends, believes that commodity prices will stay low because they are in a long-term, cyclical downturn.
Separately, Dmitry Balyasny of Balyasny Asset Management said during a conference session that his US$12 billion stock-focused firm has a negative view of energy company equities, according to a person who heard the remarks. The sector has been hurt amid declining oil and gas prices.
The hedge fund and investor matchmaking event, held annually at the upscale Breakers Palm Beach hotel, is private and closed to the press. Spokesmen for Tudor and Balyasny declined to comment.
Another topic of negative views was China.
Jim Chanos of Kynikos Associates and Kevin Kenny of Emerging Sovereign Group reiterated a negative assessment of the world's second-largest economy during separate panel discussions, according to people with direct knowledge of the remarks.
Mr Chanos said that China was on a "treadmill to hell,"according to one of the people, and Mr Kenny warned that other emerging markets will likely suffer more in the near term because of China's slowing economy.
Both men are known for bets against Chinese-related securities: an Emerging Sovereign Group wager against the yuan currency yielded large paper profits last year, according to a report in the Wall Street Journal; and Mr Chanos has long warned that high Chinese levels of debt are unsustainable, among other issues.
Mr Chanos, who specialises in bets against stocks, also said in a separate discussion with hedge fund investors that he was negative on drug company Valeant and solar power business SolarCity.
According to a person with knowledge of the remarks, Mr Chanos said that Valeant no longer has the drug pricing power it used to following scrutiny of its acquisition-heavy business model. He also said that SolarCity's outlook was too optimistic given the likely long-term depreciation of its solar panels and other challenges.
Spokesmen for both companies did not immediately respond to a request for comment.
Mr Chanos has already been public with bets against both companies. He and a spokesman for Emerging Sovereign Group at parent company Carlyle Group declined to comment.
The views come after a bad year for many managers - the average hedge fund lost 0.16 per cent in 2015, according to data from industry tracker Absolute Return. Some funds are also suffering in January given broad declines in stocks and commodities.
To be sure, some hedge fund heavyweights at the oceanfront event gave optimistic views.
One came from Eric Mindich of Eton Park Capital Management. The US$9 billion multistrategy firm manager said during a panel discussion that he is positive on Japan and related investment opportunities. Eton Park's main fund gained 7.5 per cent for 2015 in part because of winning Japan bets. A spokesman for the firm declined to comment.
Mr Kenny of Emerging Sovereign Group also tempered his negative near-term views on China by saying that it and other emerging markets would likely become so cheap that it would present a strong buying opportunity.