* Ackman's Pershing Square down 7 pct in May
* Third Point funds lose ground last month
* Paulson gold fund tumbles 12 pct, but other funds gain
* Tail risk funds post gains as markets swung
By Svea Herbst-Bayliss and Katya Wachtel
BOSTON/NEW YORK, June 6 May's stock market rout
dealt a blow to many on Wall Street including several big hedge
fund stars whose bets on prominent U.S. companies looked badly
Even William Ackman and Daniel Loeb, two of the $2 trillion
industry's most respected players, failed to escape last month's
sharp sell-off and finished May in the red.
Ackman's Pershing Square Capital Management lost 7 percent,
dropping more than the Standard & Poor's 500 index's 6 percent
decline. Loeb's Third Point Partners dipped 2.6 percent, while
the Third Point Ultra fund fell even more. Both managers are
still in the black for the year, however.
The news was much worse at some other hedge funds. Whitney
Tilson, Ackman's college friend who has often invested in
similar stocks, reported a 13.6 percent drop in his T2 Partners
in May, acknowledging that most of his stock picks "got
clobbered." His fund is still up for 2012, though, beating the
Standard & Poor's 500 index's 5.2 percent gain.
Even Vladimir Efros, whose persistently strong returns at
Abundance Partners earned him high praise from Institutional
Investor as one of the industry's up-and-coming stars, stumbled
badly in May. Last month's 10.65 percent loss leaves his fund
off 21.19 percent.
Like others, Efros said he was seduced by facts and figures
that seemed to point to an upswing. "As our long term investors
know, we have often been bearish on stocks," Efros wrote to
investors, adding "Recently, however, we felt that the macro
environment had become more supportive of U.S. stock prices."
Investors across financial markets have reacted with
increasing alarm at the drumbeat of bad news from the United
States to China in the face of contagion fears from Europe's
When sentiment soured in May and investors worried anew
about world economies, big name stocks were hurt. Pershing
Square was hit hard when retailer J.C. Penney Co Inc,
one of its biggest holdings, tumbled 27.3 percent.
Other large holdings at Pershing Square also lost money,
including investments in Canadian Pacific Railway, where Ackman
last month won a dramatic battle to remake the country's
second-biggest railroad, and real estate development and
management company Howard Hughes Corp. Spirits company Beam Inc,
another holding company, made money for Pershing Square.
Meanwhile, the Dow Jones Credit Suisse Core Hedge Fund Index
fell 1.5 percent in May.
A MIXED BAG FOR PAULSON
Meanwhile, John Paulson, who is struggling for a second
consecutive year after losing 50 percent in one big fund in
2011, turned in a mixed performance. His gold fund tumbled 12.7
percent in May and is now off 22.5 percent for the year. But his
credit fund rose 0.93 percent in May, and is up 5.26 percent for
Meanwhile, losses in the closely-watched Paulson Advantage
Plus fund were limited to only 0.6 percent. For the year, the
fund is off 10 percent.
Other Paulson funds recorded losses in May but still managed
to keep returns in positive territory for the year. The Enhanced
fund lost 1.3 percent last month and is up 10.7 percent for the
year. The Recovery fund lost 2 percent for the month, and has
returned over 5 percent for the year. The firm's merger
arbitrage fund is up 5.2 percent for the year after losing 0.7
percent in May.
There were some prominent winners during the month,
including people who expected bad news and profited when it came
as they expected.
John Burbank's Passport Capital is up 20 percent for the
year, thanks largely because he has never been more short, one
investor familiar with his thinking said.
Tiger Global Management's Chase Coleman, one of the
industry's best performers last year, gained 2.5 percent in May,
an investor said. His spokeswoman declined to comment. The $4.6
billion managed futures firm QIM saw its flagship Global fund
rise more than 7 percent last month. The firm declined to
comment on its performance.
Some tail risk funds, which aim to protect investors from
shock market events, recorded big wins last month when global
markets sank. Boaz Weinstein's Saba Capital saw his tail risk
fund surge by 20 percent in May, though one investor said the
fund is now flat for the year.
The $7.8 billion asset manager Pine River Capital
Management's tail hedge fund gained 10.8 percent, according to
someone familiar with the number. Pine River declined to