market folly

Hedge fund Glenrock Global Partners recently issued their March 2010 performance update and we received a tiny glance into some of their portfolio positions. For March, their QP fund was down 0.7%. This brought their year-to-date total to -0.3%. You can compare these numbers to the slew of prominent hedge fund performance figures we posted up yesterday. While Glenrock has struggled this year, they'd be quick to point to their 11.6% compound annual return since 2000 versus the S&P 500 which compounded -0.4% over the same time frame.

First, some background for those unfamiliar. Glenrock Global Partners is a long/short equity fund, similar to many we cover in our hedge fund portfolio tracking series. Managed by Michael Katz and Mark Budris, they definitely have a global focus as you'll notice when we share some of their recent positions below. What's impressive about Glenrock is that they've had no down years, 10.3% volatility, and -0.4 beta since 2000. They focus on bottom-up fundamental stockpicking and also use macro factors to help guide them.

So, let's dive into their portfolio specifics. Their longs have had solid performance, but that has been more than canceled out by their short positions running against them. This is a common theme we've seen across hedge fund land as of late. Their five biggest individual losing positions were as follows:

- stub position in a French carmaker
- short positions in a US REIT
- a US national bank
- a Swiss investment bank
- a Japanese insurer

Of course hedgies always like to keep us on our toes, so let the guessing games begin. It's been no secret that many managers have tried to short REITs time and time again only to see their efforts go to waste. We've heard that names like SL Green (SLG), Macerich (MAC), Kimco (KIM), and CBL (CBL) were previously in the mix, but who knows if that's the case nowadays. Not to mention, we've previously taken a look at how high operating leverage is a common theme in hedge fund short positions. If anything, you can use these portfolio disclosures to get a better sense as to how their positioned by sector and exposure level.

Turning to Glenrock's five biggest gainers in March, they list:

- a US defense contractor
- a stub position trade in a German engineering and construction firm
- long positions in a Japanese consumer-electronics manufacturer
- Japanese office-machine company
- a Brazilian credit-card company

Immediately the most intriguing thing to us was their mention of the Brazilian credit card play. While this is speculation on our part, it's pretty likely that this position is either in Cielo, formerly VisaNet (trading under RDCD3 in Brazil) or in Redecard (trading under CIEL3 in Brazil and CIOXY on the pink sheets in the US). These two companies are essentially international versions/arms of Visa and Mastercard, respectively.

The thesis here has largely been hinged on an expansion of credit extension to Brazilian consumers and a secular shift from paying with legal tender to paying with plastic cards. This is a trend we've largely seen in prominent hedge fund US equity portfolios via plain-jane Mastercard (MA) and Visa (V) equity stakes. Since the SEC filings only cover US equity stakes, we can't see their stakes in foreign payment processors. However, it wouldn't be a stretch if some hedgies have acquired positions in these foreign credit card plays like Glenrock has. This was just the first time we'd seen it directly referenced.

Let's turn our focus now to Glenrock's portfolio exposure levels. The most notable thing here is that they are net short the North American region (-5.9% exposure). Additionally, their largest net long by region is in Asia with 8.7% net exposure. Their next highest exposure is in Europe at 3.0% net long. In terms of market cap exposure, they are net short large cap names to the tune of -5.8% and are net long midcaps at 8.4% exposure.

Lastly, let's shift to industry weightings. Glenrock is definitely net short financials at -10.9%, net short industrials at -4.4% and net short REITs at -3.3%. On the other side, they are net long information technology at 9.1%, healthcare at 7.1% and energy at 6.2%. So, that definitely gives you a clue as to how long/short hedge funds are possibly positioned on a geographical and sector level.

To see some other recent hedge fund portfolio & exposure figures, we just yesterday covered Dan Loeb's Third Point update. And for our constant coverage of the latest SEC filings, head to our posts on hedge fund tracking.