The hedge fund manager David Tepper has done well again by betting on the moves of Washington.
Mr. Tepper, who runs Appaloosa Management, a $14 billion hedge fund in Short Hills, N.J., told CNBC in late September that the Federal Reserve’s willingness to intervene in the market with quantitative easing meant that most investments — except for Treasury bonds — would do well.
At the time, Mr. Tepper told CNBC that his hedge fund had slightly increased its investments in stocks.
Judging by his fund’s results for October, Mr. Tepper has been riding the stock market rally, which took off last week after the Federal Reserve announced plans to pump $600 billion into the economy through the purchase of Treasury bonds.
Mr. Tepper’s flagship fund, Appaloosa Investment, had a return, after fees, of 5.10 percent last month, which brought its return for the year to 20.90 percent as of the end of October, according to the monthly results released by the fund to its investors. His offshore fund, Palomino, returned 5.07 percent after fees last month for a 20.98 percent increase for the year as of the end of October. And his Thoroughbred fund had a net return of 3.07 percent in October and 18.23 percent for year.
By comparison, the Standard & Poor’s 500-stock index rose about 3.7 percent in October; it is up 9.7 percent for the year.
“Despite an under emphasis in equities through most of the third quarter, performance was good,” according to an investor letter dated Oct. 28 from the Palomino fund. The letter said that “towards the end of the quarter, particularly after the Federal Reserve statement, we became more constructive on equities.”
The letter noted that the fund was “more bullish in general” but was monitoring its positions.
In recent years, Mr. Tepper has done well by betting that the government would follow through with its stated moves. For instance, he told CNBC that he bought bank stocks in 2009 because the federal government published its plan to prop up the financial sector after the credit crunch. (His fund produced a whopping 132 percent return last year, largely because of the bet.)
“It was easy,” Mr. Tepper said in the interview. “The government told you what they were going to do.”
Similarly, in recent months, he has banked on statements from the Federal Reserve that it was prepared to add more fuel to fire the economic recovery. More than a month before it introduced plans to buy bonds, the Fed gave the public a first clue to its thinking. After a meeting in late September, the Fed released a statement saying the Federal Open Market Committee was “prepared to provide additional accommodation if needed to support the economic recovery.”
Then, a few weeks later, when the minutes of the Fed meeting were released, more evidence emerged that the central bank was likely to act — sooner rather than later. The minutes revealed that Fed members “generally” sensed accommodation might be needed “before long.”
Mr. Tepper’s recent move into stocks is notable because Appaloosa has been known for investing in distressed securities, particularly bonds. That is not surprising given that Mr. Tepper got his start in life trading junk bonds at Goldman Sachs & Company.
Appaloosa Investor Letter
Mr. Tepper, who runs Appaloosa Management, a $14 billion hedge fund in Short Hills, N.J., told CNBC in late September that the Federal Reserve’s willingness to intervene in the market with quantitative easing meant that most investments — except for Treasury bonds — would do well.
At the time, Mr. Tepper told CNBC that his hedge fund had slightly increased its investments in stocks.
Judging by his fund’s results for October, Mr. Tepper has been riding the stock market rally, which took off last week after the Federal Reserve announced plans to pump $600 billion into the economy through the purchase of Treasury bonds.
Mr. Tepper’s flagship fund, Appaloosa Investment, had a return, after fees, of 5.10 percent last month, which brought its return for the year to 20.90 percent as of the end of October, according to the monthly results released by the fund to its investors. His offshore fund, Palomino, returned 5.07 percent after fees last month for a 20.98 percent increase for the year as of the end of October. And his Thoroughbred fund had a net return of 3.07 percent in October and 18.23 percent for year.
By comparison, the Standard & Poor’s 500-stock index rose about 3.7 percent in October; it is up 9.7 percent for the year.
“Despite an under emphasis in equities through most of the third quarter, performance was good,” according to an investor letter dated Oct. 28 from the Palomino fund. The letter said that “towards the end of the quarter, particularly after the Federal Reserve statement, we became more constructive on equities.”
The letter noted that the fund was “more bullish in general” but was monitoring its positions.
In recent years, Mr. Tepper has done well by betting that the government would follow through with its stated moves. For instance, he told CNBC that he bought bank stocks in 2009 because the federal government published its plan to prop up the financial sector after the credit crunch. (His fund produced a whopping 132 percent return last year, largely because of the bet.)
“It was easy,” Mr. Tepper said in the interview. “The government told you what they were going to do.”
Similarly, in recent months, he has banked on statements from the Federal Reserve that it was prepared to add more fuel to fire the economic recovery. More than a month before it introduced plans to buy bonds, the Fed gave the public a first clue to its thinking. After a meeting in late September, the Fed released a statement saying the Federal Open Market Committee was “prepared to provide additional accommodation if needed to support the economic recovery.”
Then, a few weeks later, when the minutes of the Fed meeting were released, more evidence emerged that the central bank was likely to act — sooner rather than later. The minutes revealed that Fed members “generally” sensed accommodation might be needed “before long.”
Mr. Tepper’s recent move into stocks is notable because Appaloosa has been known for investing in distressed securities, particularly bonds. That is not surprising given that Mr. Tepper got his start in life trading junk bonds at Goldman Sachs & Company.
Appaloosa Investor Letter
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