The past few years have been nothing short of brutal for the short-only hedge fund space. QE3 was launched in September 2012, equities went through the roof, and the market has never looked back since. HFR data shows that from 2012 to 2014, short-only funds lost an average of 35%, a stark contrast to the S&P’s over 75% gain in the same period.
Thankfully however, 2015’s a little different – especially for Jim Chanos’ crew at 22 West 55th Street.
After losing money since 2012, Jim Chanos’ Kynikos Associates is now firmly in the black according to the Wall Street Journal, and it didn’t just creep there either, no, it actually posted some respectable gains in August alone:
The Ursus and Kriticos funds, which bet only against stocks, gained 6.2% and 8.2% in August, according to the document.
The fund’s returns were mostly driven by bets against energy prices and – you guessed it – China, though the former did drive most of the gains, according to someone familiar with the matter.
Still, the returns are tiny compared to Kynikos’ glory years. In 2008, when vaunted hedge funds such as Tudor and SAC chalked up their first ever losses, the firm’s Ursus fund surged 62%. And let’s not forget Chanos’ epic Enron short back in 2001.
They still have more than enough reason to cheer up though. Recent Preqin analysis shows that hedge funds overall slipped 1.88% in August, exacerbating a 0.45% fall in July, and took the industry’s returns down to 1.96% year to date. And besides, as Chanos said two months ago regarding China, “The story has yet to play out…As long as China adds credit faster than its growth, the real story is months and years ahead.” I’m sure he’ll be there when that happens.
Photo: Insider Monkey