The best and worst performing Legends in 2016

Most of our Legends made money in 2016. However, only VR Global and Transtrend really stood out. A number incurred meaningful losses.

1. VR Global: +17%
2. Transtrend Omnitrend Plus: +11.5%
3. Discovery Global Opportunity: +6.4% (since Nov)
4. Moore Global Investments: +6.1%
5. King Street Capital: + 5.5%
6. Millennium International: +3.3%
7. Brevan Howard Fund: +3.0 %
8. Glenview Capital: -2.6%
9. Egerton Long Short Fund: -3.9%
10. Lansdowne Developed Markets: -14.9%
11. Pershing Square Holdings: -28.2%
12. Paulson Enhanced Fund: -49.3%

VR Global made gains in areas that were neglected by most investors, most notably Ukraine. Transtrend gained mainly from long positions in Bunds, Gilts and US Treasuries.

Paulson Enhanced stood out on the negative side. Specialty pharma exposure was the main culprit. The fund is in a position to hold on to its exposures and will profit sharply when the sector rebounds. We enter 2017 with a position of about half its target weighting as we feel risk management has clearly failed at Paulson, but at the same time there is significant upside from these levels.

Pershing Square Holdings was the second largest detractor from performance. About 2/3rds of the loss was a widening of the discount to the underlying fund’s NAV. We have steadily increased the position as the discount grew and are entering 2017 with a full position. We expect the discount to narrow when positive events in the underlying portfolio unfold. We are already seeing some of this in January. We retain our confidence in the team of Pershing Square and expect them to do well over the years to come.

The other significant detractor was Lansdowne Developed Markets. Here, too, we have every confidence in the management and we enter 2017 with a full position.

Often, great funds that suffer large drawdowns but are structured with a stable capital base, will turn out to be the top performers of a subsequent period.