Verition and Carlson funds are up amid market downturn

While big-name stock-pickers have fared poorly in 2022, the flagship funds at Verition Fund Management and Carlson Capital have churned out positive returns for the year through September, according to their investor letters.

Funds managed by the likes of Cathie Wood and Chase Coleman are down big amid surging inflation and worries about a global recession. But multi-strategy hedge funds Verition and Carlson, which each manage about $6 billion, are up 4.3% and 2.8%, respectively, thanks to their equity teams’ prowess. Similarly, larger rivals like Citadel and Millennium are also up for year.

Unlike those that made large, concentrated bets, Verition and Carlson instead have diversified portfolios and tight risk limits — hallmarks of the multi-strategy style.

Brand-name stock-pickers, such as Tiger Management alums Coleman and Philippe Laffont, make concentrated investments based on their deep conviction in their names. But that can be disastrous if something unforeseen happens.

Institutions invest in multi-strategy firms for the stability, not the person. Yes, founders like Steve Cohen are great money managers in their own right, but the reason pension funds park billions at Point72 is because of the firm’s structure and systems, not necessarily the individual portfolio managers’ pedigrees.

The track records of stars like Stanley Druckenmiller, George Soros, and more indicate this can be a one-person show.

It’s less about always being right on your big bets and more about when to get out, Druckenmiller has said — a lesson harder to follow with more private companies in big-name funds’ portfolios.