Chanos’s Kynikos Opportunity Fund Lost 14% in 2013

February 9, 2014 Leave a comment

Chanos’s Kynikos Opportunity Fund Lost 14% in 2013

Fund Posts Largest Decline in at Least a Decade

ROB COPELAND

Updated Feb. 7, 2014 7:11 p.m. ET

A boom year for many global markets produced losses for one famously pessimistic hedge-fund manager.

James Chanos’s Kynikos Opportunity Fund fell 14% last year, the largest decline in at least a decade, according to a document detailing fund performance. That was the second consecutive year of losses for that fund, which dropped less than 1% in 2012.

The S&P 500 gained 32% last year, including dividends, which meant challenging conditions for many so-called short sellers, who bet against stocks. Most hedge funds, including the Kynikos Opportunity Fund, can bet on rising markets and also profit from falling ones.

Mr. Chanos, who was one of the first to spot trouble at Enron Corp., is noted for his bearish market calls. Kynikos Associates LP manages at least $4 billion across several funds, according to regulatory filings. The performance for its other funds wasn’t included in the document.

Mr. Chanos, who founded the firm in 1985, didn’t respond to requests for comment Friday.

The Kynikos Opportunity Fund had been profitable earlier. It posted double-digit gains in four of the previous five years, including a 19% rise in 2008, when many hedge funds lost money during the financial crisis.

Figures for January 2014 weren’t listed in the document.

At an annual hedge-fund forum last month at the Breakers resort in Palm Beach, Fla., where the document was distributed, Mr. Chanos reiterated his negative view on Chinese developers and coal-related investments, said a person who attended the event, organized by Morgan Stanley. MS 0.00%

Mr. Chanos was particularly critical of Chinese home builders, which he said are incentivized to overbuild because they are paid in full before construction is completed, the person said. The hedge-fund manager argued that China has shown indications of a credit bubble since 2009, the person said.

Mr. Chanos told The Wall Street Journal last month that he was still betting againstCaterpillar Inc., CAT +1.11% the world’s biggest maker of construction and mining equipment. Caterpillar dropped 16% in 2013 but has rebounded modestly this year, helped by aggressive cost-cutting that helped it beat analysts’ earnings expectations.

“The only reason they beat [estimates] was because of two one-time items,” Mr. Chanos said. “This is a company that, if you go back to last year’s earnings release, in January 2013, their outlook was wildly off the mark.”

A Caterpillar spokeswoman declined to comment.

The average hedge fund returned 9.2% last year, according to research provider HFR Inc., badly trailing the broader market.

This year has been brighter for the industry, HFR data released Friday indicate. The average hedge fund lost 0.6% last month; during the same period, the Dow Jones Industrial Average tumbled 5.3% and the S&P 500 retreated 3.46%, including dividends.

 

Filed under Macro Trends

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