In This Issue

• European firm with $40 billion in assets on how to ride out uncertainties  
• Hedge funds see biggest inflows in 7 years
• Greenlight's Einhorn says inflation could still surprise to the upside

• Reminder: CNBC's Delivering Alpha conference is on Sept. 28 in New York City

The Sharpe Angle Interview: Mathieu Chabran 

How one European asset manager is weathering uncertainty in the region 

When does tech become cheap enough that an investor who had previously shunned the space altogether starts to say, “sure, maybe I’ll give that a try.” 

Well, according to Mathieu Chabran, the co-founder of Tikehau Capital, a nearly $40 billion European-based alternatives firm, that time may be now – or at least soon. 

“That market repricing has happened, for the time being, very much in the public market,” said Chabran in an interview for the Delivering Alpha Newsletter. “It’s starting to transition into the private market from what we’re hearing.” 

That caveat – “from what we’re hearing” – is because Chabran had previously described what was going on with tech valuations as a “bonanza.” As a result, he has completely avoided the area entirely, as others piled in amid a prevailing FOMO mentality. 

Given the recent selloff, Chabran may be seeing more possibilities. 

“We prefer a market that is repriced by 75 percent – for some [companies] than what [they were] only six months ago,” said Chabran. “And again, having some bespoke pool of capital, we certainly provide great opportunity in a market that is trying to find itis equilibrium.”

One example he gave was financial technology. Having raised a lot of dedicated capital for financial services, Chabran said he can’t ignore the growing pocket within that space, which is “FinTech.” 

“We're coming to a rebalancing of some excesses that we had seen, you know, in this very particular space of the market,” he said. 

Hedge funds attract the biggest inflows in 7 years on the back of market volatility

The hedge fund industry attracted its largest inflows in seven years during the first quarter as investors sought downside protection amidst a volatility spike triggered by fears of inflation and rising rates as well as geopolitical tensions.

The $4-trilion community saw total capital inflows of $19.8 billion during the first three months of 2022, the highest quarterly inflow since the second quarter of 2015, according to hedge fund data firm HFR.

The big interest in hedge funds came as the bull market was threatened by the Federal Reserve's aggressive tightening, Russia's invasion of Ukraine as well as shocking 40-year-high inflation. The S&P 500 suffered a correction and lost 5% in the first quarter, marking its worst quarterly performance since the start of the pandemic in early 2020.

Hedge fund managers took good advantage of the choppiness in risk assets in the first quarter, posting a narrow gain of 0.3% overall, according to HFR. Macro strategy, including commodity trading advisor and systemic funds, was a standout winner with a 9.1% return during the period, its best first-quarter performance since 1993, HFR said.

 "We think the current investment environment — higher rates, higher inflation, and higher volatility — speaks in favor of hedge funds as an effective diversifier to reduce overall portfolio volatility," said Mark Haefele, UBS Global Wealth Management's chief investment officer.

Citadel's multistrategy flagship fund Wellington gained 4.7% in the first quarter with all five of its underlying strategies — equities, credit, fixed income and macro, commodities and quantitative — being positive for the period, according to a person familiar with the returns.

David Einhorn's Greenlight Capital notched a 4.4% gain in the first quarter, driven in part by short positions and index hedges, the manager said in an investor letter obtained by CNBC.

In the middle of January, Greenlight added more index hedges and increased its macro positions in corporate credit default, while directing its research efforts to focus on short ideas, Einhorn said.

Delivering Alpha Headlines

Big thoughts from the big money

Bill Ackman on dumping his big Netflix bet

Pershing Square dumped its stake in Netflix at a loss following the streaming service company’s disappointing quarterly report. Bill Ackman revealed that this bet reduced his hedge fund's 2022 returns by 4 percentage points. The investor told CNBC’s Scott Wapner that a losing bet could be costly for his very concentrated portfolio. “I’m 100% ready to admit when I’m wrong and 100% ready to admit when I’m wrong, quickly,” Ackman told Wapner. “This might work with someone with a portfolio with smaller positions.  But when you have 8 or 9 investments that are large it’s hard to have bets where the dispersion of outcomes can be so wide.”

Greenlight’s Einhorn says inflation could surge even more

Greenlight Capital’s David Einhorn said inflation could still surprise to the upside, even with the Federal Reserve tightening monetary policy. “We remain bullish on future upside surprises to inflation,” Einhorn said in an investor letter. “If the Fed was SERIOUS about stopping the inflation problem, it would be as aggressive and creative in tightening as it was when it was easing.”

Dan Niles loads up on travel and leisure stocks

Hedge fund manager Dan Niles told CNBC he’s been buying travel and leisure stocks, betting strong consumer demand heading into the summer will the propel the shares higher. The Satori Fund founder and senior portfolio manager said he’s long a basket of about 10 so-called pandemic reopening stocks. Niles said he started buying them in mid-March and has been looking to add to them strategically, including on Monday.