Gapping up
In reaction to earnings/guidance:
- PI +16.5%, NOW +14.3%, TDOC +11.6%, GSHD +9.5%, HZO +7.5%, ETD +7.4%, OII +6.9%, SHOP +6.6%, PTEN +6.3%, FLEX +6.3%, PPC +6.2%, BUD +6.2%, UCTT +6% (also authorizes new $150 mln share repurchase program), ALSN +5.7%, COUR +5.3%, SHEL +5.2%, CAT +5.2%, HON +5.1%, PGRE +5%, VMI +5%, MMSI +5%, PLXS +4.7%, OMF +4.4%, CCJ +4.1%, LUV +4.1%, ARES +3.9%, CARR +3.3%, BHE +3.2%, MCD +3%, MOH +2.9%, AZPN +2.9%, TPH +2.8%, ORLY +2.4%, MRK +2.2%, ARCH +2.2%, MUSA +2.1%, NLY +1.8%, ABEV +1.8%, AIT +1.8%, PDS +1.5%, DAN +1.5%, VC +1.4%, AR +1.2%, ENSG +1.2%, BFH +1.2%, AEM +1.1%, TTE +1.1%, ACMR +1.1%, BWA +1.1%, CMS +1.1%, AM +1%, LYG +1%, LPG +1%
Other news:
- GENI +5% (expands partnership with Football DataCo for Premier League)
- AMSF +5% (declares special cash dividend of $4/sh)
- VRAY +2.3% (MIRAGE Phase III Randomized Controlled Trial Demonstrates Superiority of MRIdian MRI-Guidance in Stereotactic Body Radiotherapy (SBRT) for Localized Prostate Cancer)
- MRK +2.2% (names new chairman)
- JXN +2.1% (expands relationship with Halo Investing)
- MRO +1.6% (increases dividend)
- AWK +1.6% (acquires City of Blue Grass wastewater system)
Analyst comments:
- AGNC +2.3% (upgraded to Overweight from Equal Weight at Barclays)
- NLY +1.8% (upgraded to Overweight from Equal Weight at Barclays)
Early premarket gappers
- Gapping up:
- PI +18.1%, NOW +12.4%, GSHD +9.5%, TDOC +8.8%, COUR +7.5%, ETD +7.4%, BUD +7%, OII +6.9%, PPC +6.2%, UCTT +6%, ALSN +5.7%, MOH +5.3%, ACMR +5.1%, GENI +5%, AMSF +5%, PGRE +5%, FLEX +5%, VMI +5%, MMSI +5%, OMF +4.7%, PLXS +4.7%, AZPN +4.2%, CCS +4.1%, ARES +3.9%, SHEL +3.7%, MEOH +3.3%, BHE +3.2%, PTEN +3.2%, MUSA +3.1%, TPH +2.8%, CLB +2.5%, CYH +2.2%, JXN +2.1%, KLAC +2%, ORLY +1.9%, MIRM +1.8%, WFG +1.7%, AWK +1.6%, NLY +1.6%, ENSG +1.2%, AEM +1.1%, AM +1%
- Gapping down:
- SNBR -26.3%, WOLF -23.9%, META -19.7%, ALGN -18.8%, FORM -17.6%, AMED -14.6%, SLP -10.4%, CS -9.8%, TROX -9.4%, STM -6.8%, ACGL -6.2%, LC -5.8%, UPWK -5.1%, BOOT -4.5%, VFC -4.4%, CNMD -4.1%, DLR -3.3%, INVH -3%, GL -2.9%, BMRN -2.9%, APO -2.8%, OSTK -2.7%, AR -2.6%, JBT -2.4%, CHDN -2.2%, F -2.2%, TECK -2.1%, FTI -2%, NTGR -1.7%, GEO -1.7%, ASX -1.5%, INFA -1.2%, LPG -1.2%, SAVE -1%
Multi-strategy hedge funds are the new, superior fund-of-funds
One style to rule them all, and in the alpha bind them
One of the consequences of the financial crisis that gets little airplay these days is the slow extinction of fund-of-hedge funds. They’re not dead yet of course (there’s still about $644bn in them), but it’s pretty much the only corner of the investment industry that has flatlined or shrunk over the past decade.
Fund of funds made make an alluring promise to investors. For a fee, they find the finest hedge fund managers on the planet, combine them into a diversified, uncorrelated and high-returning portfolio, monitor their performance and occasionally cull the weakest from the herd.
In reality, in many cases it is simply another fat layer of fees over a compensation scheme masquerading as an asset class, which has ended up producing dismal results. That several big funds-of-funds invested in Bernard Madoff’s Ponzi scheme hammered home how feckless some of them were, and soured a generation of investors against the vehicles.
However, the basic model outlined above will sound familiar to some Alphaville readers, as this is pretty much the model of “multi-strategy” hedge funds like Millennium, Citadel, Point72, Balyasny or Schonfeld.
I’m not quite ready to die on this hill, but I reckon that multistrats should essentially be seen as a souped-up, better version of old-school fund-of-funds. They will eventually supplant them completely — and could ultimately dominate the hedge fund industry as a whole.
To be honest, they already have eclipsed funds-of-funds. HFR’s data indicates that the assets under management of multi-strategy hedge funds have comfortably vaulted above stagnating FoFs in recent years.
With assets under management of about $890bn, multi-strategy hedge funds are now bigger than standalone global macro funds (ca $607bn if you strip out multistrats that do macro) and approaching the roughly $1tn size of the classic equity hedge fund industry, according to HFR’s data.
Unlike traditional long-short equity funds — like the famed Tiger cubs that came out of Julian Robertson’s Tiger Management — multistrats have a horde of portfolio managers, traders and analysts that pursue a wide variety of strategies and operate in semi-autonomous units inside the mother ship. (That’s why they’re sometimes also called “multi-manager” hedge funds.)
They can do anything from M&A arb, commodities, systematic trend-following, index rebalancing trades, global macro, long-short equities, or fixed income relative value. Basically the whole menu of potential hedge fund strategies, all combined with a cherry on top.
The advantage is that some strategies that struggle as standalone funds can be added in for an overall better result. For example, a dedicated short selling hedge fund can be tricky to scale as an independent firm, but can be a great source of diversified returns as a sleeve in a broader one.
Risk is managed for each unit, and centrally by the firm itself. Even for hedge funds, multistrats are fabled for their brutal Darwinism. If you do well you get more money from the central pool to manage, and if you do poorly your allocation gets cut. And if you do very poorly, then you’re out faster than you can say “mayo”.
So far this year, multistrat funds are the second-best performing major hedge fund style, according to Aurum, only surpassed by quant funds (where we suspect results are heavily skewed by systematic trend-followers like Systematica that have been minting it this year).
Of course, there’s a fair bit of variety in the results. To take some examples we’ve seen in the press and investor documents lately, Citadel, Millennium, and Brummer are up 29 per cent, 9.7 per cent, and 15.3 per cent respectively this year through September, Weiss Multi-Strategy was flat by the end of August, while Sculptor Capital (formerly known as Och-Ziff) was down over 10 per cent.
Funds-of-funds are infamous for their extra layer of fees, but multi-strategy funds are similarly notorious for their own typical cost structure, known as a “pass-through” fee model.
In lieu of the typical 2 per cent annual management fee many simply pass every single expense — whether rents, Bloomberg terminals, server costs, salaries, bonuses and even client entertainment — on to their investors. Often this can end up being 3-10 per cent of assets a year, on top of the 20-30 per cent of any profits they take.
This is unusual in an industry where average fees have grudgingly been heading downwards for a while.
Hefty pass-through fees can be quite a big turn-off for some investors and the hedge fund consultants that act as their money conduits.
FTAV also suspects that their breadth means they actually sit a little awkwardly in a some institutional investor’s overall portfolio. Most investors like to try to fine-tune their allocations by asset classes, factors, styles etc, but multistrats can defy categorisation. Many fund-of-funds probably have the same issue today.
However, the pass-through model is an advantage when it comes to attracting entire teams of top traders. These days you can basically set up a quasi-independent hedge fund under the umbrella of a multistrat and not have to worry about the non-investing side at all.
And in reality, there are few major institutional investors in the world that wouldn’t kill for a fatter allocation to the flagship funds of Citadel or Millennium.
Their long-terms are the stuff of legend, but most of the biggest and best-performing funds are closed to new money, and typically return most of their annual gains to investors to control their size and optimise their gains. That means money sloshes over elsewhere in the multistrat world.
But I suspect that one of the biggest reasons why there is still a lot of money left in funds-of-funds — aside from classic inertia — is simply that pretty much all the top-tier multi-manager funds are closed to new money. Here’s what Bloomberg wrote in a piece last year:
Across the industry, a record 1,144 hedge funds have stopped accepting new money, the most since data tracker Preqin started compiling the information. Of twenty multi-manager firms managing more than $220 billion collectively, thirteen are no longer taking in more cash, according to Julius Baer Group Ltd. Crucially, those closures are happening at some of the biggest and sought-after firms.
So why am I making this long-winded argument about multi-strategy hedge funds and FoFs? It’s just something I’ve been thinking about as a mental model to explain to myself the exploding popularity of multistrats (beyond the juicy returns of some of the top funds).
Thoroughly analysing portfolio managers, judging how much capital their strategies can optimally manage, constantly monitoring them, and firing underperformers; management is an arduous, difficult task — even before you start thinking of how to combine them into an overall portfolio.
I suspect a lot of institutional investors are realistically not up to it, but they intuitively liked the fund-of-funds model, and now love the multistrat model.
After all, who wouldn’t want Steve Cohen, Izzy Englander, or Ken Griffin to oversee their hedge fund portfolio? And if you can’t get one of them, then the second- and third-tier multi-manager funds are still likely to do better than most FoFs. The question is whether they’ll still be worth it, or if they’re merely benefiting of the lustre of the top dogs.
>>> Up
* Amplifon Raised to Buy at Banca Akros (+)
* Ferrari Raised to Buy at HSBC
* Norwegian Air Raised to Hold at Nordea; PT 8.50 kroner (+)
* Novo Nordisk Raised to Buy at Intron Health; PT 900 kroner
* Saipem Raised to Buy at Banca Akros (+)
* Scanfil Raised to Buy at Inderes; PT 7.25 euros
* Sitowise Group Raised to Buy at Inderes; PT 5.50 euros (+)
* Suominen Raised to Accumulate at Inderes; PT 3 euros
* TT Electronics Cut to Hold at Jefferies; PT 165 pence
>>> Down
* Ageas Cut to Hold at Berenberg
* Cargotec Cut to Reduce at Inderes; PT 41 euros (+)
* Dassault Systemes Cut to Underweight at JPMorgan; PT 31 euros
* Konecranes Cut to Hold at Handelsbanken
* Meta Platforms Cut to Sector Weight at KeyBanc
* Meta Platforms Cut to Equal-Weight at Morgan Stanley; PT $105
* PATRIZIA SE Cut to Reduce at Baader Helvea; PT 8 euros
* Thule Cut to Hold at SEB Equities; PT 260 kronor (+)
>>> Initiation
* Brooks Macdonald Reinstated Add at Numis; PT 2,340 pence
* Intl Petroleum Rated New Outperform at ATB Capital
* Rathbones Group Reinstated Hold at Numis; PT 2,015 pence
* Telenor Maintained at Buy at New Street Research
>>> Call
* Ageas Downgraded to Hold at Berenberg Following Profit Warning
* Beiersdorf Posts ‘Broad-Based’ Beat Fueled by Nivea: Citi (+)
* Dassault Systemes Cut at JPMorgan on Slowdown in License Sales
* Increased Stake in Getlink Is Positive for Eiffage, RBC Says (+)
* Lufthansa Outlook Optimistic With Strong 4Q Bookings: Bernstein (+)
* Morgan Stanley Slashes China Stock Outlook After Party Congress
* Rexel Outlook Implies About 7% Lift to Consensus: Morgan Stanley (+)
* Schneider Electric’s Revenue Can Drive Consensus Upside: RBC (+)
* Unilever Shares to ‘Slightly Outperform’ After 3Q Sales Beat: MS (+)
* Volvo 3Q Ebit Miss on Margin Squeeze, Polestar Losses: Bernstein (+)
Europe, China Drive Moncler Sales in Q3, Revenues in Nine Months Surpass 1.55 Billion Euros
The two regions contributed to a 32 percent gain in revenues in the first nine months of the year at the Moncler Group.
Strong growth in Europe and an improvement in China contributed to a 32 percent gain in revenues in the first nine months of the year at the Moncler Group.
In the period ended Sept. 30, sales surpassed the 1.55 billion euros benchmark, compared with 1.17 billion euros in the first nine months of 2021. Compared with 2019, sales climbed 57 percent at constant exchange.
In the third quarter, revenues rose 12 percent at constant exchange to 638.3 million euros compared to the same period last year. Compared to 2019, sales climbed 50 percent.
“We are now facing the most important period of the year with confidence and great energy; conscious of the strength of our brands and of the unique and distinctive projects planned for these months,” said chairman and chief executive officer Remo Ruffini.
The executive underscored that “the spectacular event” in Milan’s Piazza Duomo at the tail end of fashion week drew over 18,000 people, and that the company continues to celebrate its 70th anniversary this year with a series of events and activations to connect with the brand’s communities around the world.
All the following figures were provided at constant exchange. The Moncler brand posted a 21 percent gain in revenues in the nine months, reaching 1.25 billion euros.
The solid double-digit growth continued in the third quarter, up 13 percent on the third quarter of 2021, driven by the direct-to-consumer distribution channel, which grew 21 percent.
In Asia, which includes the Asia-Pacific region, Japan and Korea, revenues in the first nine months grew 15 percent to 548 million euros compared with last year and they rose 36 percent compared with 2019. Growth in the third quarter was 14 percent on last year and up 40 percent compared with the same period in 2019, driven by the reopening of directly operated stores in the Chinese market, especially in July and August. Korea and Japan continued to record good growth also in the third quarter. In Asia, both channels recorded double-digit growth in the quarter.
During a conference call with analysts on Wednesday at the end of trading in Milan, Luciano Santel, chief corporate and supply officer, said the third quarter in mainland China was positive.
“June was good, and July and August are in line with June,” but that because of new lockdowns, business was weaker in September. However, he added that “the first week of October and the second week of October were very, very strong for China.”
He reminded analysts that Golden Week took place in the first week of October and that the results then were “very, very good, showing a strong double-digit growth,” also driven by the impact of the 70th anniversary events and the launch of the Maya 70 jacket.
While the situation in China is “still volatile and uncertain,” he explained that “what is very important from our perspective that is more focused on the long term, is that the brand in China is really very strong. Of course, we have to live with this situation.” Korea remains strong, as it has been for the past three years at least, Santel said, also citing Japan’s strong performance.
Moncler launched on Tmall at the end of September — an “important step to develop a new audience for our brand,” said Santel.
In the Europe, Middle East and Africa region, revenues in the first nine months increased by 29 percent to 486.3 million euros compared with the same period of 2021 and by 14 percent compared with 2019.
In the third quarter, sales were up 16 percent driven by strong demand from both local customers and American tourists. France, Germany, and Italy were the countries that contributed the most to the growth in the third quarter.
Revenues in the Americas in the first nine months grew by 18 percent to 218.2 million euros and they were up 34 percent on 2019. In the third quarter, sales rose 6 percent while they were up 16 percent on 2019. U.S. tourists flocked to Europe in the quarter, said Santel.
In the first nine months of 2022, Moncler’s direct-to-consumer channel was up 27 percent to 903.1 million euros.
The wholesale channel reported revenues of 349.5 million, an increase of 7 percent.
As of Sept. 30, there were 242 directly operated Moncler stores, an increase of four units compared to the end of June, among which were Düsseldorf and two conversions from the wholesale channel. As of Sept. 30, there were 61 wholesale shops-in-shop, a decrease of three units, among which were the conversion to retail of the Zurich Airport unit and the Paris La Samaritaine store.
Revenues at the Stone Island brand increased 23 percent to 304.1 million euros in the first nine months of 2022 compared with the first nine months of 2021 pro forma, since the brand was consolidated on April 1 last year.
In the third quarter, sales grew 8 percent compared with the same period last year, led by the direct-to-consumer channel.
In August, Stone Island Japan was established as a joint venture majority-held by the Italian brand, now directly managing the business in the country comprising 16 existing mono-brand stores converted from wholesale.
The Europe and Middle East and Africa region, the most relevant region for the Stone Island brand, grew by 14 percent to 218 million euros compared to 2021 pro-forma. Italy outperformed the rest of the region in the quarter, reporting a double-digit growth.
In the nine months, Asia reached 52.4 million euros in sales, up 66 percent.
The Americas recorded growth of 40 percent to 33.6 million euros.
The wholesale channel, which represents the most important channel for Stone Island, showed a 7 percent gain to 212.6 million euros in the first nine months.
Due to several conversions, the direct-to-consumer channel was up 91 percent to 91.6 million euros.
As of Sept. 30, the network of monobrand Stone Island boutiques comprised 71 directly operated stores, up 17 units compared to the end of June, as a result of the 16 conversions of the Japanese stores and the London boutique. There are also 20 monobrand wholesale stores.
Santel pointed to the relevance of the Stone Island Chicago store opened a week ago. “It is very important because it represents the new store format so that has been designed by Oma/Amo an architectural study that interpreted very well in my opinion the DNA of the brand. So we are very happy with the design and with the final result of the store.”
Santel expressed confidence in 2023, when additional Stone Islands will be opened, in Vienna, and Zurich for example, in very good locations “to properly communicate the values of the brand.” However, he said the retail strategy for the brand “is not driven by the aim to increase volumes,” which could be a short-term strategy. “Our priority now is to build a real retail culture in Stone Island, which is something that takes us some time.”
Speaking at the group level, Santel said prices were increased this season and also for spring 2023 by an average of about 10 percent, depending on individual currencies and that “the impact, the response has been, honestly, good, I would say, unrelated to prices.”
He explained that the increase in prices was to “offset the production cost increase for this season and for spring 2023 with questions about the following season since the cost of energy is decreasing.” What is impacting Moncler is “the raw materials that we buy from our suppliers that use energy. The step before fabric is the production of yarn. And so that kind of production is energy-intensive.”
Santel said that after working and investing on the footwear line for more than a year, the results were good, “performing very well with a very strong sell-through. I mean, the first prelaunch online was sold out in a few hours.” He admitted that Moncler was “not in a hurry” to build this business, and that “we are very confident for the future.” He also said that in the upcoming summer season, the collection will be broader. The plan with footwear is to achieve by 2025 sales equivalent to about 10 percent of the business. “We are confident about the first results, but there’s still a lot, a lot of work to do,” he said.
- Aegon (AEND TH) +4%
- Aegon to Combine Dutch Ops With ASR; Plans €1.5B Capital Return
- Daimler Truck (DTG TH) +1.7%
- Daimler Truck Lifts Outlook on Strong Demand, Firm Prices
- MTU Aero (MTX TH) +1.2%
- AB InBev (1NBA TH) +1%
- Budweiser Maker Says Beer Demand Still Strong Despite Inflation
- Reckitt (3RB TH) +0.9%
- Rio Tinto (RIO1 TH) +0.8%
- ASR Nederland (A16 TH) +0.7%
- Aroundtown (AT1 TH) -1.1%
- Lanxess (LXS TH) -1.2%
- ASML (ASME TH) -1.3%
- Nibe (NJB TH) -1.4%
- Swedish Match (SWMC TH) -1.6%
- Adyen (1N8 TH) -1.8%
- Nel (D7G TH) -1.9%
- Wacker Chemie (WCH TH) -2.2%
- Wacker Chemie Narrows FY Ebitda Forecast
- HelloFresh (HFG TH) -2.3%
- HelloFresh Maintains FY Adjusted Ebitda Forecast
DAX:
- Daimler Truck (DTG TH) +2.4%
- Daimler Truck Lifts Outlook on Strong Demand, Firm Prices
- Deutsche Bank (DBK TH) +0.7%
- Porsche SE (PAH3 TH) +0.6%
- Beiersdorf (BEI TH) +0.4%
- Beiersdorf Sees FY Organic Revenue +9% to +10%, Est. +8.51%
- BASF (BAS TH) -0.3%
- Clariant Beats Expectations, Warns on Inflation Pressures
- Adidas (ADS TH) -1%
MDAX:
- K+S (SDF TH) +0.8%
- TAG Immobilien (TEG TH) +0.8%
- Lufthansa (LHA TH) +0.5%
- Lufthansa Sees Strong Quarterly Bookings Despite Inflation Woes
- Kion (KGX TH) +0.4%
- TotalEnergies, AB InBev, EDF, Neste: Earnings Day Ahead
- Commerzbank (CBK TH) -0.1%
- Aroundtown (AT1 TH) -1%
- Lanxess (LXS TH) -1.2%
- Aixtron (AIXA TH) -1.4%
- Aixtron Boosts FY Ebit Margin Forecast
- Wacker Chemie (WCH TH) -1.5%
- Wacker Chemie Narrows FY Ebitda Forecast
- HelloFresh (HFG TH) -1.8%
- HelloFresh Maintains FY Adjusted Ebitda Forecast
SDAX:
- PNE AG (PNE3 TH) +0.9%
- Nordex (NDX1 TH) -1.1%
- Uniper (UN01 TH) -1.2%
- Germany Ready to Up Uniper Aid to €60 Billion in Worst Case (2)
- VERBIO Vereinigte (VBK TH) -1.5%