Top-100 Hedge Fund – Carlson Capital – Some Pointers – UPDATED 1/28/16
By Frederic Marsanne
Published on January 28, 2016
Every once in a while, the market does something so stupid it takes your breath away.
Indecision and delays are the parents of failure.
Nothing is worth more than this day.
Only those who have patience to do simple things perfectly ever acquire the skill to do difficult things easily.
Eighty percent of success is showing up.
I don’t want to achieve immortality through my work. I want to achieve it through not dying.
Image courtesy of koratmember
(Cambridge, MA) — Sure, Warren Buffett, George Soros and Carl Icahn are legends. No question – Bill Ackman, David Einhorn and Julian Robertson rock – well, at least some years. So do Ray Dalio, John Paulson and David Tepper – other years? But believe it or not, there are other superstars. Smaller yet agile, epic, superlative-worthy performers…
Carlson Capital and its Black Diamond Thematic LP hedge fund claimed the 97th spot in Barron’s Penta top 100 hedge fund 2015 rankings by focusing primarily on equity long/short positions, registering three-year (2012-14) annualized returns of 15.36%. [Larry Robbins’ Glenview Offshore Opportunity fund claimed the No. 1 spot, with an impressive three-year annualized gain of 57%. Barron’s No. 2 was Richard Mashaal of Senvest Partners, who registered an annualized gain of 44%.]
Carlson Capital, L.P. is an alternative asset management firm headquartered in Dallas, Texas. Founded in 1993 by Clint Carlson, it currently manages over eight billion dollars. Carlson Capital also has offices in Houston, New York, London and Greenwich, Connecticut.
Before founding Carlson Capital Clint Carlson was head of risk arbitrage for the investment arm of the Texas-based Bass Brothers. He had his start in traditional money management with Texas Commerce Bank in Houston, and worked for another mutual fund company. In 1984, he also landed the opportunity to go to one of the risk arbitrage shops in Houston, working for Charles Horowitz (at Maxxim Inc.).
Mr. Carlson in the past has served on the boards of the University of Texas Investment Management Co., Dallas Museum of Art and the Texas Ballet Theater (where I would have loved to be a ballerina), and currently is on the boards of Rice University Management Co., the university’s Jones School of Business and Greenhill School, a private high school in Addison, Texas.
He has a JD from the University of Houston and an MBA from Rice University (where strangely students eat pasta; don’t ask me).
“We believe that superior risk-adjusted returns can be achieved by the use of thoughtful, targeted hedging strategies and diversification, across multiple strategies and multiple decision makers.”
The firm uses a multi-strategy approach to investing, borrowing from risk arbitrage, convertible arbitrage, relative value arbitrage (mostly pairs trading), event-driven arbitrage, distressed/credit arbitrage and traditional long/short strategies.
To quote him, “The idea was to be a multi-strategy business, because my experience taught me that some strategies go in and out of favor. And almost all hedge fund strategies are cyclical, and you needed to be able to allocate in multiple strategies because of the possibility that one could be suboptimal at any given time. We started out with risk arbitrage, convertible arbitrage and a strategy we call equity relative value, which is equity pairs trading, industry-neutral. In 2002, there was a big dislocation in the credit markets and we saw an opportunity there, (so) we started to build a credit team, and that became the fourth strategy. Then in the intervening years we’ve added traditional long/short and also residential mortgage-backed securities strategies, and those are our new strategies, including a thematic long/short equity portfolio. So that’s how the firm evolved.”
Carlson Capital’s portfolio includes 336 positions with a total market value of $8,359 million (as of 9/30/2015).
It is rather diversified. Carlson Capital has 30% of assets in its top ten holdings (again, as of 9/30/15) (but note that nearly half of that goes into the top holding!), as follows:
- M & T Bank (MTB), 13.83% of holdings
- Chubb Corp (CB), 2.61% of holdings
- Citigroup (C), 2.26% of holdings
- Exelon (EXC), 2.23% of holdings
- Bunge (BG), 2.12% of holdings
- Calpine Corp (CPN), 1.75% of holdings
- Precision Castparts (PCP), 1.62% of holdings
- Coca Cola (KO), 1.28% of holdings
- Broadcom (BRCM), 1.23% of holdings
- Cameron International (CAM), 1.22% of holdings
Carlson Capital just purchased $2.37 million of Archrock, Inc., formerly Exterran Holdings, Inc., at an average price per share of around $5. (1/25 and 1/26/2016)
Details of Carlson Capital’s portfolio (top 60 positions) are provided below:
60 of 336 Positions, as of 09/30/2015
|Company||Class||Value of Shares ($1,000s) ▼||Change in Value ($1,000s)||Change (%)||Shares Held|
|M & T BK CORP||COM||1,156,470||39,988||3.58||10,836,488|
|CITIGROUP INC||COM NEW||188,867||-38,648||(16.99)||4,179,405|
|CALPINE CORP||COM NEW||146,697||79,743||119.10||11,004,990|
|PRECISION CASTPARTS CORP||COM||135,355||135,355||New||583,000|
|COCA COLA CO||COM||106,769||30,081||39.23||2,551,221|
|BROADCOM CORP||CL A||103,247||1,996||1.97||1,940,000|
|CAMERON INTERNATIONAL CORP||COM||102,281||102,281||New||1,728,600|
|NRG ENERGY INC||COM NEW||97,135||28,811||42.17||9,891,531|
|STANCORP FINL GROUP INC||COM||91,480||91,480||New||804,500|
|CIT GROUP INC||COM NEW||89,243||-19,802||(18.16)||2,595,041|
|VALERO ENERGY CORP NEW||COM||89,223||24,155||37.12||1,372,026|
|COMCAST CORP NEW||CL A||82,334||2,946||3.71||1,537,514|
|TRI POINTE GROUP INC||COM||78,363||10,289||15.11||7,637,679|
|TERADATA CORP DEL||COM||69,889||13,475||23.89||3,080,160|
|PINNACLE FOODS INC DEL||COM||69,754||9,513||15.79||1,621,806|
|UTI WORLDWIDE INC||ORD||67,077||21,180||46.15||9,500,941|
|ALTRIA GROUP INC||COM||65,616||28,023||74.54||1,135,623|
|VIAVI SOLUTIONS INC||COM||65,354||32,213||97.20||12,424,662|
|WESCO INTL INC||COM||64,785||21,011||48||1,665,000|
|REGIONS FINL CORP NEW||COM||63,310||-9,577||(13.14)||7,600,284|
|MORGAN STANLEY||COM NEW||62,410||58,233||1,394.01||2,320,950|
|VITAMIN SHOPPE INC||COM||60,866||2,937||5.07||1,954,597|
|EXPRESS SCRIPTS HLDG CO||COM||58,607||44,661||320.25||735,432|
|WPX ENERGY INC||COM||56,473||41,188||269.46||13,012,249|
|GAP INC DEL||COM||52,772||12,870||32.25||2,347,500|
|JPMORGAN CHASE & CO||COM||51,949||-1,147||(2.16)||905,989|
|BANK AMER CORP||COM||51,535||21,730||72.91||3,458,715|
|DIGITAL RLTY TR INC||COM||50,887||24,937||96.10||655,510|
|MCGRAW HILL FINL INC||COM||50,371||29,630||142.85||597,024|
|DYNEGY INC NEW DEL||COM||49,685||33,377||204.67||4,224,928|
|NEWFIELD EXPL CO||COM||48,951||-6,291||(11.39)||1,737,687|
|WESTERN DIGITAL CORP||COM||47,593||35,846||305.13||952,056|
|NOKIA CORP||SPONSORED ADR||47,319||-7,281||(13.34)||6,499,800|
|POPULAR INC||COM NEW||46,525||29,473||172.84||1,909,898|
|MONOLITHIC PWR SYS INC||COM||46,119||2,299||5.25||792,565|
|CITIZENS FINL GROUP INC||COM||45,992||28,340||160.55||1,980,718|
|CONAGRA FOODS INC||COM||45,819||10,278||28.92||1,159,100|
|DEVON ENERGY CORP NEW||COM||45,746||26,651||139.57||1,844,613|
|AMERICAN TOWER CORP NEW||COM||45,527||-35,082||(43.52)||494,049|
|ALLY FINL INC||COM||44,067||3,224||7.89||2,771,500|
|CISCO SYS INC||COM||42,689||42,689||New||1,735,308|
|COSAN LTD||SHS A||42,610||14,335||50.70||14,693,000|
|TIME WARNER CABLE INC||COM||41,301||17,957||76.92||230,000|
|SOUTHWEST AIRLS CO||COM||40,857||22,859||127.01||1,011,311|
|FIFTH THIRD BANCORP||COM||40,292||1,350||3.47||2,325,000|
|ALPHABET INC||CAP STK CL C||39,912||13,970||53.85||56,971|
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