Five Shares Backed By The UK’s Wealthiest Hedge Fund Managers

This article is for educational purposes only and should not be interpreted as investment advice.


Warren Buffet’s million dollar bet that the S&P 500 would outperform a fund of hedge funds over the course of ten years is looking good. With 3 years left to run, Buffet is up 40% and Protégé Partners’ Ted Seides, who took the other side of the bet, has effectively conceded defeat.

Faced with inferior performance against the indices over the last several years, hedge funds are struggling to justify their steep fees. Why would an investor choose a hedge fund ahead of an index tracker fund charging 0.25% or less?

But any talk about the imminent demise of hedge funds is surely premature. With a combined fortune of just over £5.5 billion, the UK’s 5 wealthiest hedge fund managers* (listed below in order of wealth) have demonstrated that they can generate substantial returns from the market.

Here are their top picks by portfolio percentage from Q4 2014**.


1) Alan Howard of Brevan Howard
Y P F Sociedad Anonima (Ticker: YPF S.A.)
YPF is an energy company involved in the exploration, development and production of crude oil, natural gas, and liquefied petroleum gas in Argentina. As you might expect with an oil company, the share price collapsed from just over $35 at the end of November to a range of a few dollars either side of $25 since. However a report published in October 2014 by Morgan Stanley (NYSE:MS) suggested Argentina could be the next frontier in the shale oil revolution which could explain why
Howard took such a big bet on YPF in the last quarter, allocating just under 15% of his portfolio to the share.


2) Michael Platt of Bluecrest Capital Management
Covance Inc (CVD)
While Covance describes itself as an outsourced research provider and drug developer for the pharmaceutical and biotech industries, the company is somewhat controversially involved in animal testing. It was acquired by Laboratory Corp of America (NYSE:LH) in a $6.1 billion deal in November 2014. The share price jumped from just under $80 at the start of October to slightly more than $100 after the deal was announced, no doubt earning a healthy profit for Platt’s investors in the space of a few days.


3) Michael Hintze of CQS
Fiat Chrysler Automobiles (FCAU)
As one of the largest car manufacturers in the world, Fiat Chrysler doesn’t require much of an introduction. Having spent the latter half of 2014 consolidating at around $10, the share price broke out in November. After a 15% correction at the start of December, it continued to climb and reached a high of $15.50 in mid-February. This is despite the recently announced 67% fall in annual profits, partly explained by Fiat completing the purchase of Chrysler at the start of the year. Hintze obviously feels that the share will continue to climb though, quite possibly fuelled (excuse the pun) by the drop in oil prices.


4) David Harding of Winton Capital
Edwards Lifesciences Corp (NYSE:EW)
Edwards Lifesciences designs and manufactures tissue heart valves used to treat heart disease. The share price experienced a fairly consistent uptrend in 2014, starting the year at $67 and ending it up 90% at $127 (although price has consolidated between $125 and $135 since the start of December). The company recently announced stronger than expected Q4 figures with profits of $109 million, a 45% increase on the corresponding quarter in 2013. What’s more, Zacks foresees significant growth potential in emerging markets over the next few years, particularly Japan, which bodes well for Harding and his investors.


5) Chris Hohn of Childrens Investment Fund
Time Warner Cable Inc. (NYSE:TWC)
Hohn didn’t add any new positions to his portfolio in Q4 so in this case, I’m highlighting an increase in the fund’s existing holdings. It’s quite a significant increase too, boosting the holding by 45% to 58.74% of the overall portfolio. Time Warner’s share price has been relatively volatile over the last year but significantly the media conglomerate merged with Comcast in February 2014. The merger is still pending approval by the financial authorities but should it go through, Hohn is clearly betting that the share price will soar.


Hopefully this provides a valuable insight to the inner workings of the notoriously secretive world of hedge funds. All but one are growth stocks based on strong fundamentals while the odd one out, Covance, was the subject of M&A activity. What impact these shares end up having on each individual manager’s portfolio remains to be seen of course.