• Short seller Fahmi Quadir, who runs the fund Safkhet Capital in New York, made a 24% return last year.
• In an interview with Business Insider, Quadir said her winning trades come from focusing on shorting companies with "predatory business models." 
• The 28-year-old is currently eyeing a private company focused on the student debt market, that may eventually IPO. 
• She said her fund only makes "conviction" bets because it "can't afford to spend time throwing darts."
• Click here for more BI Prime stories.

Short seller Fahmi Quadir says her Safkhet Capital fund made a 24% return in 2018, an impressive feat for a year that saw hedge fund after hedge fund end up in the red. Her strategy: make big, all-or-nothing bets on companies with what she calls "predatory business models."

The tactic was a winner in her bet on MiMedx, a biopharmaceutical company rocked by whistleblower and accounting scandals that led to a management overhaul and a whopping 93% plunge in the stock. 

While this year's short bet on German payments company Wirecard hasn't yet tracked the success of 2018, she's already plotting her next target. To find it, she said she started eyeing Americans' ballooning US debt pile. 

Quadir said she's lured by companies in that space who have products that are priced higher than those of peers, which "contributes to a debt spiral." 

While declining to name any specific names, Quadir said she's researching a potential short trade of a firm focused on student loan debt, which is currently private and might eventually IPO. 

"It's more the business model itself that attracted us, we're not making a call on the debt market itself," she said in an interview. "But in these companies that are focused on the consumer, the level of bankruptcies and delinquencies have been ticking up in the past year."

According to the Federal Reserve, US outstanding student loan debt has more than doubled to $1.6 trillion in the past decade, while last year US credit card debt hit a record $870 billion.

Read more: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company

"If you look at these underlying asset-backed sectors, the underlying accounts are certainly deteriorating," she said. "Then you have companies dependent on these markets to access liquidity, so it becomes more difficult when the quality of accounts has deteriorated so much."

She points to the Fed's warning late last year that business-sector debt relative to GDP is worryingly high.

"So they've been able to obtain debt at very cheap terms." she said. "What that's led to is being able to keep the doors open, but not necessarily sustainable. Once they're unable to access the credit markets, it's unclear whether they're able to maintain the business." 

Fahmi Quadir burst onto the seen in a Netflix documentary

Quadir burst onto the scene in a Netflix special called "Dirty Money," where she joined her bearish peers in calling out the drug giant Valeant. With that trade, Quadir took on Bill Ackman, a longtime Valeant bull who lost billions when suspect accounting revelations tanked Valeant's stock and eventually prompted a management overhaul. 

She's followed others' lead on some of her other bets as well (Tesla, Wirecard, South Africa's Capitec Bank).

"Another thing we look at is companies that have been targeted in the past — investigative journalists, short sellers, consistent criticism over a period of time — how odd that these companies have managed to succeed," Quadir said. "Because usually, when there's that kind of consistency, there's something behind that."           

Quadir also wasn't the only one who piled into MiMedx. The short seller Marc Cahodes and Viceroy Research founder Fraser Perring famously pushed the short case on the trade for more than a year. MiMedx replaced its CEO and a key exec after the company found insiders spied on whistleblowers who had called out revenue manipulation. 

It's been a rocky year for some big bets. Wirecard, which Quadir's Safkhet Capital is "significantly" short, has seesawed up and down, even rallying year to date — despite several explosive reports from the Financial Times outlining suspect accounting practices. Wirecard has denied the claims. 

"Generally, we're focused on fraud and exploitative practices, so that's where we'll be looking first," Quadir said. "That's not thematically driven, but you'll see the connection if you look at our portfolio."

Quadir's fund is smaller than most hedge funds. And it only has one analyst, a 33-year-old out of Yale's business school, Christina Clementi.

But that's not the only reason she bets on very few trades: "We can't afford to spend time throwing darts," Quadir said. "We would rather spend that time on our conviction ideas."

SEE ALSO: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company

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NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

• A US hedge-fund manager has attacked China's ruling party after a tribunal concluded prisoners are being executed to harvest their organs for transplants.
• "Reading this made me sick to my stomach,"tweeted Kyle Bass, the head of Hayman Capital Management. "It's time to completely cut ties with the MURDEROUS PIGS that run the Chinese Communist Party."
• China has denied the claims.
• Bass is a China bear who has accused Huawei of theft, condemned the Chinese as "genocidal killers," and cheered the Hong Kong protests in the past week.
• View Markets Insider's homepage for more stories.

A US hedge-fund manager has attacked China's ruling party on Twitter after an independent tribunal of human-rights advocates concluded prisoners are being executed to harvest their organs for transplants.

"Reading this made me sick to my stomach,"tweeted Kyle Bass, head of Hayman Capital Management, referring to an article detailing the China tribunal's findings. "It's time to completely cut ties with the MURDEROUS PIGS that run the Chinese Communist Party."

Bass, a longstanding China bear, shorted the Chinese yuan for nearly four years until exiting the position earlier this year. He has accused Chinese smartphone giant Huawei of stealing US technology, condemned the Chinese as "genocidal killers," and cheered Hong Kong protestors' resistance to a China-backed extradition bill in the past week.

The China tribunal determined members of religious minorities such as Falun Gong have been imprisoned, tortured, and executed to harvest their organs for transplants. It found evidence of prisoners being kept alive while their organs were forcibly removed. Cases of forced organ harvesting in China date back at least 20 years and continue, it said.

"Forced organ harvesting from prisoners of conscience has been practiced for a substantial period of time involving a very substantial number of victims,"the tribunal concluded. "Very many people have died indescribably hideous deaths for no reason."

Chinese officials have dismissed the claims as politically motivated and untrue, saying they stopped harvesting organs from death-row prisoners in 2014 and shifted to a voluntary donation system.

The tribunal was headed by Sir Geoffrey Nice, a barrister who led the prosecution of Slobodan Milošević, the former president of Serbia charged with genocide, torture, and other crimes against humanity. The panel included several human-rights lawyers, a surgeon, and a historian.

SEE ALSO: Hong Kong's extradition bill could plunge it into the US-China trade war

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NOW WATCH: The US women's national team dominates soccer, but here's why the US men's team sucks

• The hedge-fund founder Glenn Dubin and his wife, Eva, have longstanding business and social ties with the convicted sex offender Jeffrey Epstein that persisted even after Epstein's 2008 conviction for soliciting a minor.
• The couple told Epstein's probation officer in 2009 they were "100% comfortable" having the sex offender around their children, including their then teenage daughter, according to a previously unreported email obtained by Business Insider.
• If they had known about the current round of allegations against Epstein, their spokesperson said, "they would have cut off all ties and certainly never have allowed their children to be in his presence." 
• The Dubins have other business and philanthropic connections to Epstein that were uncovered by Business Insider, including a hedge-fund deal gone south. 
• They're the latest high-profile Wall Street family to come under scrutiny for ties to Epstein. Last week, Business Insider revealed that Epstein was the director of the private-equity guru Leon Black's family foundation from at least 2001 through 2012. The Blacks later said that he resigned in 2007 and that they submitted erroneous tax forms for years. 

Jeffrey Epstein spent his first Thanksgiving out of jail as he had many others before that: dining with one of America's wealthiest and best-connected families, new documents reviewed by Business Insider reveal. 

In 2009, the financier — and newly registered sex offender — went to a large Thanksgiving celebration at the Palm Beach, Florida, home of Glenn Dubin and Eva Andersson-Dubin, a prominent hedge-fund manager and his model-turned-doctor-turned-donor wife. They had long invited Epstein, a onetime boyfriend of Eva Dubin who remained a family friend, to their Thanksgivings.

Instead of distancing themselves from Epstein after he spent 13 months in jail on charges including procurement of a minor for prostitution, the Dubins wrote to Epstein's probation officer and asked for permission to break bread with him — a decision they now say they regret. 

Eva Dubin even went so far as telling the probation officer via email that she and her husband were "100% comfortable" with Epstein spending time with their three children, the oldest of whom was then a teenager, according to an email obtained by Business Insider. 

"I, Eva Dubin, am an internist and have known Jeffrey for over 20 years," she wrote.

Now, though, after Epstein was arrested last week on sex-trafficking charges and his business and social circles have come under intense scrutiny for their association with the disgraced financier, the Dubins have changed their tune. 

"The Dubins are horrified by the new allegations against Jeffrey Epstein," a spokeswoman said in a statement. "Had they been aware of the vile and unspeakable conduct described in these new allegations, they would have cut off all ties and certainly never have allowed their children to be in his presence."

But in the 2008 email, which is signed "Eva and Glenn Dubin," the couple made clear that they were aware that Epstein was "a registered sex offender and had plead guilty [sic] to soliciting for prostitution, and procuring a minor for prostitution."

Epstein was a 'long-time investor' in prominent hedge fund Highbridge Capital

The Dubins are well known in New York and Palm Beach circles and have a net worth of more than $2 billion, according to Forbes. But they are far from the only couple among the ultrarich who are scrambling to distance themselves from Epstein. 

Last week, Business Insider revealed that the private-equity guru Leon Black's family foundation listed Epstein as a director in tax returns from at least 2001 through 2012. The Blacks later said he resigned in 2007 and that they accidentally submitted erroneous tax forms for years — though they have yet to provide amended returns or respond to follow-up questions about their relationship with Epstein.

The Dubins, though, appear to have had a more intimate relationship with Epstein. 

Eva Dubin once dated him, and they remained friendly after she married Glenn in 1994. That friendship helped bring Epstein into an investment opportunity that, before his 2008 jail stint, went badly for everyone.

Glenn Dubin cofounded the hedge fund Highbridge Capital Management in the 1990s and more recently started a quant fund called Engineers Gate. In 2002, Dubin connected Epstein to one of his former Highbridge employees, Daniel Zwirn, according to a 2010 complaint Epstein's Financial Trust Co. lodged against Zwirn. Dubin also advised Epstein to invest in one of Zwirn's funds, which partly focused on issuing debt to radio stations.

"One of the early investors that I introduced to Zwirn was Jeffrey Epstein," Dubin said in a 2010 sworn affidavit in subsequent litigation over money lost in the investment. "Epstein was both a personal friend of mine and a long-time investor in [Highbridge]."

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• Ray Dalio has made the case for investing in gold as central banks devalue currencies.
• The hedge-fund boss predicts a "paradigm shift" in investing.
• Dalio said too many investors have been pushed into stocks and other equity-like assets and are likely to face diminishing returns. 
• View Markets Insider for more stories. 

Ray Dalio has made the case for investing in gold as central banks cut interest rates and pump money into economies, devaluing currencies.

In a Linkedin post, the founder and co-manager of Bridgewater Associates wrote about "paradigm shifts" in investing. He said investors have been pushed to buy stocks and other equity-like assets that are likely to face diminishing returns.

"The world is leveraged long, holding assets that have low real and nominal expected returns that are also providing historically low returns relative to cash returns," he said. "I think these are unlikely to be good real-returning investments," he added.

More promising investments are those that "do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold," he said.

The price of gold jumped 0.7% on Thursday morning to around $1,423 an ounce.

The Federal Reserve is expected to cut rates in about two weeks' time. Under the new paradigm, Dalio said, investors should change their mindsets about what will work after Wall Street's record bull run.

"In paradigm shifts, most people get caught overextended doing something overly popular and get really hurt," he wrote. "On the other hand, if you're astute enough to understand these shifts, you can navigate them well or at least protect yourself against them."

Dalio added that the financial crisis was the last major "paradigm shift" and pointed to unsustainable growth rates as a root cause. Bridgewater "navigated the crisis well when most investors struggled," he said, because it studied the 1929 crash, enabling it to recognise problems early. 

SEE ALSO: Here's why the Fed may be nervous about the US economy

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NOW WATCH: Animated map shows where American accents came from

• Ray Dalio has advised investors to bet on China or risk missing out on their piece of the next global empire.
• "Would you have not wanted to have invested in the industrial revolution and the British Empire?" the hedge fund manager asked in an interview on YouTube.
• Dalio sees China as a competitor to the US and recommends investors have "bets on both horses in the race."
• However, he warned the US-China trade war could spread to a capital or embargo war or escalate even further, which would make him bearish on both countries.
• View Markets Insider's homepage for more stories.

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Ray Dalio has advised investors to bet on China or risk missing out on their piece of the next global empire, days after the Trump administration officially labeled the world's second-largest economy a "currency manipulator" and announced tariffs on virtually all Chinese goods.

"Would you not have wanted to invest with the Dutch in the Dutch empire?" asked the founder and cochief investment officer of Bridgewater Associates, the world's largest hedge fund, in an interview on YouTube. "Would you have not wanted to have invested in the industrial revolution and the British Empire? Would you have not wanted to have invested in the United States?" 

'I think [China is] comparable," Dalio said, highlighting the four-fold growth in Chinese equity markets and the seven-fold growth in its bond markets over the past decade. He views China as a competitor to the US and recommends investors play both sides. "You want to be, if you're diversified, having bets on both horses in the race."

However, the recent escalation in the yearlong US-China trade dispute has given him pause. "Unfortunately the war with China is spreading," he wrote in a LinkedIn post.

"Yesterday it spread to a currency war that will affect all currencies. It could spread to a capital war and/or an embargo war. In a worst case, it could go beyond that. We need to watch it closely."

Dalio pointed to the ultimate scale of the two countries' trade squabble as a key determinant of his investing stance.

"If there's no big war, I'm bullish on China, and if there's a big war, I'm bearish on both the US and China," he said.

Dalio also flagged "three big forces" for investors to watch: the point where there's an economic downturn and central banks can't cut interest rates further and their asset purchases cease being effective, when rising inequality sparks "extreme" conflicts between the rich and poor, and the battle for global dominion between the rising power of China and the incumbent world power, the US.

SEE ALSO: Ray Dalio warns the US-China trade war may be evolving as signs mount of a 'major escalation'

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NOW WATCH: Animated map shows where American accents came from

• Glenn and Eva Dubin, a billionaire couple with deep ties to Jeffrey Epstein, received a massage recommendation from the financier years ago, according to interviews and police records reviewed by Business Insider.
• Epstein hired one masseuse as an assistant when she was 23, before she received her massage-therapy license. She gave Epstein erotic massages and massaged his close friends and assistants, as well as the Dubins on at least one occasion.
• The Dubins said they did not recall the massage, and the masseuse said there was no erotic component. The couple, who remained friendly with Epstein after he went to jail on charges including soliciting a minor for prostitution, reiterated that had they known of the new allegations against the disgraced financier, they would have cut off contact.
• The masseuse said that she "massaged many of Epstein's friends" while she worked for him but that none of them expected any sexual favors.

In 2003, a young college student was recruited to answer phones and run errands for the financier Jeffrey Epstein in Palm Beach, Florida.

The job turned into much more, including massages for Epstein and a referral to massage at least one billionaire couple, according to a police report from January 2006. The massages for Epstein, she told the police, became sexual.

Over the course of the Palm Beach Police Department's investigation into the now disgraced sex offender, which ended in a secretive 2008 plea deal, investigators spoke with Johanna Sjoberg. Her story offers a window into how Epstein's network functioned, from the way he found girls and women to service his needs to how some of them connected with his rich and famous friends.

See more:Hedge-fund giant Glenn Dubin and his wife, Eva, told Jeffrey Epstein's probation officer they were '100% comfortable' with the sex offender around their kids. New documents show the extent of the billionaire couple's relationship with Epstein.

On a referral from Epstein, for example, Sjoberg gave at least one massage to Glenn and Eva Dubin, the billionaire couple with longtime ties to Epstein that they now say they regret.

The Dubins' patronage, at Epstein's recommendation, of a masseuse who had given him erotic massages has not been previously reported. She gave a statement to the police in 2006 and spoke with the Daily Mail in 2007, and Business Insider has confirmed details of her story. A lawyer for Epstein did not respond to a request for comment.

Now a hairstylist, Sjoberg told the police she met Epstein in 2003, when she was 23, according to the 2006 report. She said she was approached on the campus of Palm Beach Atlantic University, the private Christian college she attended, by Epstein's longtime friend Ghislaine Maxwell, who was looking for assistants for Epstein's Palm Beach house.

Sjoberg took the part-time job and began providing massages to Epstein before she received her massage-therapy license, which public records indicate was issued in November 2003. She also massaged Epstein's paramour Nadia Marcinkova and his assistant Sarah Kellen, the police statement said.

She told the police that Epstein turned some of the massages into sexual encounters:

"He would instruct her to rub his nipples as he masturbated himself. [She] stated she felt 'grossed' about the behavior but as she was getting paid, she just continued. [She] also advised she would on occasion perform the massages naked. Epstein would on occasion, utilize the vibrator/massager on her vagina area when she performed the massages. Sjoberg explained that Epstein never exposed himself to her."

Epstein paid her and "took care of" her college tuition, in addition to renting a car for her for a week, the police statement said. She later told the Daily Mail that Epstein also covered the down payment on her home and paid for her to become a masseuse and hairstylist. (She told the Daily Mail that she met Epstein in 2001, when she was 21 —two years earlier than in her account to police investigators.)

'Nothing inappropriate is being alleged'

Epstein referred Sjoberg to at least one other client, she told the Palm Beach police in January 2006.

"Epstein also recommended her to another client who resides at Breakers Row in Palm Beach area," the police report of her interview said. "The client she was referred to was 'Glenn' unknown last name, and his wife, who she provided a massages [sic] to."

Business Insider has confirmed that the Glenn referred to in the statement was Glenn Dubin, who had a house with a Breakers Row address until 2012, according to public records. Sjoberg gave Dubin and his wife at least one massage.

See more:Private-equity guru Leon Black's family foundation is scrambling to distance itself from sex-offender Jeffrey Epstein, but it's raising more questions

It's unclear when the massage took place, and there was no erotic component, Sjoberg told Business Insider.

"I massaged many of Epstein's friends when I worked for him, because I was a talented licensed massage therapist," Sjoberg said. "To me, Glenn was just another person on the table. There was never any other expectation by his friends. If something inappropriate happened I would have a memory of it."

"The Dubins have no recollection of this person or event but regardless, nothing inappropriate is being alleged," a spokeswoman for the couple said. "Any suggestion to the contrary is highly irresponsible and completely inaccurate."

The Dubins' relationship with Epstein dates back to the 1980s, when Epstein dated Eva Dubin — then Eva Andersson — and continued after he went to jail in 2008 on charges including procuring a minor for prostitution.

Business Insider reported last month that Eva Dubin emailed Epstein's probation officer in 2009 ahead of hosting a large Thanksgiving meal, saying the couple was "100% comfortable" with Epstein around their children, including their then-teenage daughter.

Epstein and the Dubins have financial ties as well as personal ones. Epstein was a "longtime investor" in Highbridge Capital, the hedge fund Glenn Dubin founded in the 1990s, according to an affidavit Dubin submitted in a court case in 2010. And both men were investors in a fund run by D.B. Zwirn, a former Highbridge Capital employee. According to Vanity Fair, Epstein "arranged" the sale of Highbridge to JPMorgan Chase, and Epstein made a $75 million investment in a fund run by another former Highbridge portfolio manager at Dubin's recommendation.

Epstein and the Dubins were also philanthropically intertwined. In 2009, Epstein sought to make a donation to Eva Dubin's breast-cancer charity, the Dubin Breast Center of the Tisch Cancer Institute at Mount Sinai. To avoid public scrutiny over a donation from a registered sex offender, he made the donation through another charity established by Eva Dubin, the Celina Dubin United Fund, which in turn donated about $26,600 to the breast-cancer group from 2010 through 2012, according to tax records.

The Dubins said they were "horrified" by last month's federal charges against Epstein. The money manager is accused of running a sex-trafficking ring in Florida and New York for years, involving girls as young as 14.

"Had they been aware of the vile and unspeakable conduct described in these new allegations, they would have cut off all ties and certainly never have allowed their children to be in his presence," the Dubins said through a spokeswoman, adding that they thought Epstein had rehabilitated himself and "deserved a second chance."

Other finance links

The Dubins aren't the only high-profile family whose ties to Epstein have recently come under scrutiny.

Leon Black, the private-equity titan who cofounded Apollo Global Management, continues to be criticized as lacking transparency around his social, financial, and philanthropic links to Epstein. Weeks after Business Insider and other outlets reported his various ties to Epstein, Black said in memos to employees and investors that Apollo never did business with Epstein.

He countered a Bloomberg report that said he allowed Epstein to pitch his services to Apollo executives. Black did acknowledge that he donated money to Epstein's charities and vice versa. He has not explained why he donated $10 million to an Epstein-run foundation in 2015, years after the money manager was released from jail.

See more:Billionaire private-equity guru Leon Black is reaching out to Apollo investors about his relationship with Jeffrey Epstein

He also has not provided amended tax returns to confirm that he and his wife removed Epstein as the director of their family foundation in 2007. Epstein's name appeared on tax documents through 2012 in what the Blacks' spokeswoman said was a clerical error.

Epstein also reportedly funneled dozens of wealthy clients to James "Jes" Staley when he led JPMorgan's wealth-management business. Staley is now CEO of Barclays.

Do you have a story to share about Epstein or the Dubins? Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at mmorris@businessinsider.com, or Twitter DM at @MeghanEMorris.

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• Michael Burry, of "The Big Short" fame, foresaw the 2008 housing meltdown and bet against the subprime-mortgage bonds that exacerbated the crisis.
• Burry now runs his own hedge fund — Scion Asset Management — out of Cupertino, California.
• Listed below are his firm's 15 largest investments, according to data compiled by Bloomberg.
• Visit the Markets Insider homepage for more stories.

Michael Burry earned millions by betting against subprime-mortgage bonds in advance of the 2008 housing meltdown. 

His short trade was popularized by Michael Lewis' bestselling book "The Big Short," and the movie in which he was portrayed by Christian Bale. 

These days, he runs Scion Asset Management, a Cupertino, California-based hedge fund that owns $93.6 million worth of assets.

He hasn't stopped sounding alarms where he sees them. Most recently, Burry warned that passive investing is a "bubble."

His comments related to the trend of hedge funds and index-fund managers piling into a small collection of large-cap companies. The consolidation of capital leaves smaller growth stocks desperate for cash, Burry said.

"The bubble in passive investing through ETFs and index funds as well as the trend to very large size among asset managers has orphaned smaller value-type securities globally," he told Bloomberg.

Burry is doing some active stock picking of his own, and recently told Barron's he was going long on GameStop.

The list below shows his firm's 15 largest positions by descending order of market value, according to data from regulatory filings and news reports compiled by Bloomberg.

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1. Autech

Market value: $14.76 million

Position: 1,500,000 shares

Ownership stake: 9.75% of shares outstanding

Year-to-date performance: up 13%

Source: Bloomberg

2. Western Digital

Market value: $13.77 million

Position: 250,000 shares

Ownership stake: .08% of shares outstanding

Year-to-date performance: up 54%

Source: Bloomberg

3. GameStop

Market value: $12.69 million

Position: 3,000,000 shares

Ownership stake: 3.32% of shares outstanding

Year-to-date performance: down 68%

Source: Bloomberg

4. Alphabet Inc. Class C

Market value: $10.74 million

Position: 9,000 shares

Ownership stake:<0.01% of shares outstanding

Year-to-date performance: up 14%

Source: Bloomberg

5. Tailored Brands

Market value: $9.66 million

Position: 2,600,000 shares

Ownership stake: 5.15% of shares outstanding

Year-to-date performance: down 61%

Source: Bloomberg

6. FedEx

Market value: $9.45 million

Position: 60,000 shares

Ownership stake: .02% of shares outstanding

Year-to-date performance: down 1%

Source: Bloomberg

7. Sansei Technologies

Market value: $9.39 million

Position: 1,104,000 shares

Ownership stake: 5.71% of shares outstanding

Year-to-date performance: down 50%

Source: Bloomberg

8. Cleveland-Cliffs

Market value: $8.77 million

Position: 1,100,000 shares

Ownership stake: .41% of shares outstanding

Year-to-date performance: up 3%

Source: Bloomberg

9. Alibaba

Market value: $8.64 million

Position: 50,000 shares

Ownership stake:<0.01% of shares outstanding

Year-to-date performance: up 27%

Source: Bloomberg

10. Cardinal Health

Market value: $8.45 million

Position: 200,000 shares

Ownership stake: .07% of shares outstanding

Year-to-date performance: down 4%

Source: Bloomberg

11. Walt Disney Co.

Market value: $8.27 million

Position: 60,000 shares

Ownership stake:<0.01% of shares outstanding

Year-to-date performance: up 25%

Source: Bloomberg

12. Sportsman's Warehouse Holdings

Market value: $6.52 million

Position: 1,597,011 shares

Ownership stake: 3.71% of shares outstanding

Year-to-date performance: down 4%

Source: Bloomberg

13. Yotai Refractories

Market value: $6.35 million

Position: 1,280,000 shares

Ownership stake: 5%

Year-to-date performance: down 9%

Source: Bloomberg

14. Tazmo

Market value: $6.03 million

Position: 686,800 shares

Ownership stake: 5.08%

Year-to-date performance: up 39%

Source: Bloomberg

15. Ezwelfare

Market value: $4.72 million

Position: 574,000 shares

Ownership stake: 5.27% of shares outstanding

Year-to-date performance: up 30%

Source: Bloomberg

The hedge-fund billionaire Ray Dalio seems to be enjoying semi-retirement — and living it up at the famous Burning Man festival, which recently wrapped up.

While some billionaires don't mind the occasional outlandish outfit — think Richard Branson cross-dressing or Jeff Bezos doing his best Dwayne Johnson impression — Dalio usually sticks to a blue or gray suit, sometimes without a tie. But the Bridgewater Associates founder decided to go all out for his trip to Burning Man, the annual nine-day music and arts festival in Nevada's Black Rock Desert.

On Monday, Dalio tweeted a photo of himself at Burning Man sporting tie-dye from head to toe: bell-bottoms, a shirt, and a coat with blue fur fringe.

In the tweet, Dalio, 70, said Burning Man was like Woodstock but "with better art (installations) and less good music." Dalio also noted that the best time to enjoy the festivities was between 1 and 5 a.m.

Dalio is pictured with Jeff Taylor, a senior executive at Bridgewater Associates who founded the job site Monster.

Burning Man was a small gathering when it was founded in 1986 and now attracts about 70,000 people each year. But ultra-wealthy people like Dalio have been criticized for attending the counterculture festival. Dalio's tweet, for example, was met with criticism and trolling from Twitter users. One tweet said that because of the rich and famous attending, Burning Man's "allure has been completely fabricated."

Dalio may not be known for his fashion sense, but he is known for his unusual management style. Since founding his hedge fund, Bridgewater Associates, in 1975, Dalio has used what he calls "radical transparency" to run his company. At Bridgewater, almost all meetings are recorded, and employees can rate one another during meetings using iPads.

He's credited those management techniques with helping transform Bridgewater from a one-man operation to a hedge fund with $150 billion in assets under management.

In recent years, however, Dalio has taken a step back from management, now serving as the hedge fund's co-chief investment officer. And as Dalio's tweet shows, he's enjoying his free time.

Dalio's fur coat may look garish in the real world, but at Burning Man he would have fit in perfectly. Part of the reason the festival is so popular is that attendees can wear anything they want. Burners, as they're known, wear everything from feathers and wigs to bikinis. In many cases, clothing is optional.

Burning Man isn't the only time Dalio has dressed up (or down) for a party. In 1976, he wore short shorts to Rio de Janeiro's Carnival.

SEE ALSO: We scrolled through Ray Dalio's new app — and it's a whimsical look inside the mind of the successful, self-made billionaire

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NOW WATCH: I just spent four days at Burning Man and here are the craziest things I saw

• Autonomy Capital, a hedge fund that placed bullish bets on Argentina last year, lost roughly $1 billion in August when the country's market crashed following an election upset, according to The Wall Street Journal. 
• Argentina is now on the brink of a financial crisis and may be unable to repay its debts.
• On Sunday, the country imposed capital controls to keep its currency, the Argentine peso, from falling further. 
• The founder of Autonomy Capital reportedly still believes that Argentina can recover. 
• Read more on Markets Insider. 

Add the hedge fund Autonomy Capital to the list of casualties from Argentina's recent market turmoil. 

Founder Robert Gibbins began making bullish wagers on the country last year, betting that the country would not default on its debt. His investments included Argentina's 100-year government bond, according to The Wall Street Journal, which cited a person familiar with Gibbins' thinking.

But these wagers went south in August, when current President Mauricio Macri lost to opposing left-leaning politician Alberto Fernandez by a wider margin than expected, the Journal reported. Argentina's markets tanked after the election: the flagship S&P Merval index fell 48% in the second-largest single-day drop for any stock market since 1950, while the peso slid 15% against the US dollar. 

Over the month of August, the Argentinian turmoil sent Autonomy down 23%, or about $1 billion, the Journal reported, citing people familiar with the numbers.

Still, Gibbins stands by the investment decisions and Autonomy has even offered clients the ability to add money to the fund, the Journal said.

Gibbins believes that Argentina will recover, the Journal reported, citing sources familiar with his thinking. To be sure, Argentina has recovered from multiple defaults in the last two decades. 

At the start of August, Autonomy had roughly $6 billion assets under management. It gained 17% last year, making it one of the better-performing hedge funds, the Journal reported.  

Macri ran for the presidency on an austerity plan, negotiated the largest-ever bailout with the IMF, and reopened the market to foreign investors. When he lost, investors feared that the deal with the IMF could be renegotiated. Investor fears were compounded when Fernandez and his running mate, former president Cristina Kirchner, delayed his public remarks on any plans he had to deal with the IMF.

After the election, credit-default swaps jumped as traders priced in a 75% chance that Argentina would suspend debt payments in the next five years. Government bonds tumbled an average of 25% and some fell to as low as 55 cents on the dollar. Argentina's 100-year bonds — which Gibbins had invested in— sank to a record low.

The country's sovereign credit rating has since been downgraded by both Fitch Ratings and S&P Global Ratings. On August 28, the country pushed back maturities on local short-term debt and said it will ask holders of $50 billion of its longer-term debt to accept a "voluntary re-profiling,"Bloomberg reported. In addition, the country will renegotiate payments on the $44 billion borrowed from the IMF, which sent a team to the country to aid in the crisis. 

The Argentine stock market has recovered slightly since the crash, but is still down more than 15% percent this year. On Sunday, Macri placed capital controls to stabilize the currency in an emergency measure, Bloomberg reported.

While the move sent the peso up, the country's Eurobonds fell.

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• Major hedge funds have opened or increased short positions against European banks amid record-low interest rates after the European Central Bank cut rates again.
• Bearish bets in Jyske Bank, the Danish bank that recently launched world's first negative-interest-rate mortgage, is now at a record high, according to the short-selling-research firm Breakout Point. 
• Funds like Citadel and Merian are benefiting from uncertainty in European lenders who keep their deposits within the ECB. 
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Merian, Citadel, and Marshall Wace are among hedge funds ramping up their short interest in European lenders amid loose central-bank policies and record-low interest rates. 

Funds have increased their short-interest positions against European lenders and opened new positions in some cases. The Danish lender Jyske Bank, which recently launched the first negative-interest-rate mortgage, is now at a record high, according to the short-selling-research firm Breakout Point. 

Other banks targeted by the hedge funds include another Danish lender, Sydbank, as well as Italian banks such as Banco BPM, Unione di Banche Italiane, and Banca Popolare dell'Emilia Romagna. The Spanish lender Banco de Sabadell and Germany's Aareal Bank have also lured short bets, according to Breakout Point. 

Sydbank has also seen short-interest increases from other funds, such as Connor, Clark & Lunn Investment Management, World Quant, and Marshall Wace shorts in the stock make up just above 3% of the total shares outstanding, making the overall bet worth around $29 million.

Business Insider reached out to Connor, Clark & Lunn Investment Management, World Quant, Marshall Wace, Merian, and Citadel for comment but did not immediately receive responses. 

Citadel Europe and Citadel Advisors have a combined short interest of 1.63% in Jyske Bank, which began offering borrowers a 10-year mortgage loan at -0.5% interest in August. The bank's share price initially fell in the weeks following the news of the new mortgage rate but has since risen. 

Unlike in the US, many European countries require funds to disclose short positions to regulators. The disclosures, filed through September, were compiled and analyzed by Breakout Point. 

The European Central Bank (ECB) cut interest rates to a record low of -0.5% on Thursday, signaling a continuation of its attempts to stimulate Europe's economy through negative rates. It also unveiled plans to continue bond purchases.

Commercial banks in Europe are the main source of lending when it comes to households and small and medium-size companies, and therefore vital to the European economy.

Because "commercial banks hold their deposits within central banks, if rates are positive they gain from it, but negative rates actually act as a charge" for the likes of UBS and Deutsche, Jack Allen-Reynolds, the senior Europe economist at Capital Economics, said in an interview with Business Insider before the ECB announcement.

This charge is a "burden," Volker Hofmann at the Association of German Banks said, according to the Financial Times, which cited Hofmann at a conference as saying that lenders pay €7.5 billion ($8.27 billion) a year in negative rates on the excess deposits they hold at the ECB.

SEE ALSO: Goldman Sachs says Argentina faces a 'longer and deeper recession' after a month from hell. Here's why things could get as bad as 2001's crisis.

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• The billionaire investor Carl Icahn is moving his New York hedge fund to Florida next year, according to a report from the New York Post.
• The activist investor had reportedly been considering the move for the past couple of years and told the staff of Icahn Enterprises a few months ago that the Manhattan office would be closing at the end of March 2020. 
• Icahn is offering employees a $50,000 relocation benefit if they follow him to Florida.
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Carl Icahn is taking his talents to South Beach.

The activist investor is shuttering the New York offices of his publicly traded Icahn Enterprises and moving the operation to Miami next year, according to the New York Post.

Icahn had been considering the move for a few years and informed his employees several months ago that he planned to close the New York offices by the end of March 2020, the Post found.

Employees are reportedly being offered a $50,000 relocation benefit if they decide to join Icahn in Florida, which will be paid in April 2020 for those who make the state their permanent residence.

The investing billionaire has also assured staffers they'll be paid a minimum of what they earned in salary and bonus in 2018 for the following year. Further, anyone who is let go before the end of March 2023 will get an "immediate payment" in that same amount, according to the Post.

Read more: Top Wall Street investors say they're struggling to find big, bullish stock-market bets to make — and their paralysis might signal a meltdown is looming

Icahn Enterprises has about 50 employees, and more than half, including several lawyers and analysts, are expected to make the move to Florida. One of the primary benefits of relocating to Florida is the state's competitively low tax rate. A report from Bloomberg confirmed Thursday that taxes were very much a deciding factor for Icahn.

Icahn is known as vocal activist investor who constantly searches for ways to improve the performance of his portfolio companies. He launched a proxy battle in July against Occidental Petroleum over its proposed $38 billion acquisition of Anadarko Petroleum. 

Icahn also has major stakes in Caesars Entertainment, Xerox, and Newell Brands. 

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• Hedge funds that specialize in bearish or short bets and quant funds may have gotten crushed after the price of crude oil spiked as much as 20% Monday, a fund manager in London told Business Insider.
• It's the second such shock for funds, after last week's record decline in "momentum" trades.
• One quant-fund source in London who got hit from last week's move said: "Seriously, what a year." 
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Hedge funds that specialize in bearish or short bets and quant funds may have been crushed after the price of crude spiked as much as 20% Monday, a fund manager in London told Business Insider. The surge, triggered by attacks on Saudi Arabian oil facilities over the weekend, came as the hedge funds were already reeling from a sudden shift in equity markets. 

As much as 5% of global oil supply was taken out of the market after the oil field attacks. 

"Seriously, what a year," said a separate source at a hedge fund in London, who said this oil move, as well as an unheard of "momentum shift" last week that burned the fund, made for an "amazing" period in markets.

"It's the biggest demand shift for 100 years, and a lot of people were short or underweight," the London fund manager told Business Insider. "Many traders will have been rushing to close their position, and things might go higher if Trump and the US continue their bombastic mood on this."

In a rare move, an insider told Business Insider that BP allowed worried US clients to place orders from 5:00 p.m. central time Sunday in the US, so traders would be able to get their positions in place during the Asian market open. 

Read More:Hedge funds are getting whacked in an 'unheard of' stock-market shift — and a leaked Morgan Stanley memo warns of possible pain for months

It's the second such shock for funds

A massive shift in the stock market from top-performing growth stocks to lower-performing names triggered a sharp shift in "momentum" last week, and has also crushed hedge funds. 

"Everything that worked all year got sacked and whacked," a quant-hedge-fund source told Business Insider of the momentum move last week.

A Goldman Sachs note said the shift from growth stocks "ranks among the sharpest on record." Morgan Stanley sent a memo to clients last Wednesday, warning that the momentum trade might carry on causing pain for months. 

One large US pension saw its trend-following hedge funds, which are directly tied to momentum, lose all of its August gains in a couple days last week, a source tells Business Insider. 

The attack came at a bearish time for oil 

For oil, the sudden jolt came at a time of bearish sentiment for the commodity. As the global economy continues to slow, oil demand was expected to decline in the coming months. Earlier this month, BP's finance chief indicated that global consumption would likely grow at around 1%, its lowest annual rise since 2014. 

The move in oil upended those forecasts. Brent crude is currently trading up 10% at $66.34 as of 2.53 p.m. in London (9.53 a.m. in New York). 

BP did not immediately respond to requests for comment. 

SEE ALSO: Hedge funds are getting whacked in an 'unheard of' stock-market shift — and a leaked Morgan Stanley memo warns of possible pain for months

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• Funds including Melqart, TT International, Whitebox Advisors, and Silver Point built up short bets against Thomas Cook, likely profiting handsomely when the tour operator collapsed this week. 
• "A number of hedge funds seem to have been betting on zero (or at least very close to zero)," the research firm Breakout Point said in an email to Business Insider. 
• Thomas Cook's stock has plunged 96% in the past year. 
• The company declared bankruptcy on Monday after the government rejected a proposal to bail the company out. Its collapse stranded hundreds of thousands of tourists.

Thomas Cook's collapse on Monday left workers unemployed, tourists stranded on holidays, and investors out of pocket. 

But some hedge funds had been piling up big bets that the stock would plunge — a sign that they foresaw the outcome — and profited handsomely. 

The London-based Melqart, a fund focusing on event-driven stock moves in Europe, more than doubled its short since August 1 "and was adding to the short even the last week," the research firm Breakout Point said.

The biggest shorts in Thomas Cook were held by London's TT International, with a position making up about 3.7% of the stock. TT specializes in long-term bets and alternative strategies. 

The US firm Whitebox Advisors, which is multistrategy alternative-asset manager, held about 3.15%. TT and Whitebox have been holding these positions the longest — since end of March, when the stock was worth about 25 pence. 

Silver Point Capital, a hedge fund based in Greenwich, Connecticut, also had a short position, which made up about 0.9% of the shares.

Melqart, TT, and Whitebox declined to comment. A request for comment from Silver Point was not immediately returned.

Thomas Cook is the most shorted UK stock in Breakout Point's records, with the research firm saying the stock had the biggest rise in short interest in UK in 2019.

The so-called big shorts, or those making up more than 0.5% of the traded stock, went from 0% in January to as much as 10.7%. 

It's tricky to know which funds shorted outright and which bets were intended to hedge against other positions.

This makes calculating how much any fund profited from these short bets a difficult task. But as of July 13, short interest was about 10%, while the market cap of the stock was about £200 million, Breakout Point said. 

"Assuming that approximately all were kept until zero — there were some decreases and increases in-between, so this is an approximation — then short-selling hedge funds gained about £20 million ($25 million) from these shorts," the firm said.

The British travel company and airline declared bankruptcy on Monday, stranding about 600,000 people globally. The company had been holding a series of crisis talks with potential buyers and the UK government.

"They were holding to their shorts even as market cap went down to sub £100 million levels, and in spite of several significant price spikes," Breakout Point said to Business Insider, which suggests a very-high-conviction position. 

Unlike in the US, some European regulators require funds to disclose short positions in stocks that breach 0.5% of the outstanding shares. Breakout Point then analyzes the hedge-fund filings.

Some did warn that Thomas Cook's demise was a possibility. Barclays analysts, after cutting the price target from 46 pence to 17 pence in June, said: "We believe it (TCG) could double or go to zero pence."

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• Dev Kantesaria, the founder and portfolio manager at Valley Forge Capital Management, is quickly growing his assets under management because of his long-term, systematic approach to investing.
• An avowed value investor, Kantesaria harps on making purchases in high-quality selections with organic growth, predictable earnings, pricing power, and cost efficiency.
• His long time horizon makes him immune to day-to-day market fluctuations, which is why he says he's "not concerned" at all with today's valuations.
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When Valley Forge Capital Management was founded in 2007, it had just $126,000 in assets under management. In the 12 years since then, it has grown to over $500 million.

Hundreds of millions of dollars in assets don't just happen upon portfolio managers. It's safe to say the firm is doing something extraordinary to have swelled to roughly 3,968 times its original size.

And Valley Forge has the returns to back it up: the fund was up 44% year-to-date through August, according to BarclayHedge/Prequin. It's also seen returns of roughly 400% since it was started in 2007.

Dev Kantesaria, Valley Forge's founder and portfolio manager, attributes the firm's explosive growth rate to the adherence of strict investment principles and a long time horizon.

"We believe that the only way to outperform is a concentrated portfolio of your best ideas," he said. "Why would you want to invest in your 15th-best idea?

"A lot of portfolio managers are either taught or believe that they have to have 25, 30, 40, 50 names in their portfolio, which is absolute silliness."

This idea is at odds with the age-old investment advice that a well-diversified portfolio is the key to long-term success, but Kantesaria stresses that his point is mathematically sound. He notes that the more is added to a portfolio, the harder it becomes for an investor to one-up the market.

For that reason, he holds just eight to 12 individual issues at a time. And to make sure he's investing in only the best of the best, he focuses on value and assesses potential purchases with rigorous vetting and analysis.

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"We buy companies that are generally monopolies or oligopolies in their respective industries," he said. "They have highly predictable earnings on a going-forward basis, they have strong organic growth — in contrast to most value investors who buy cigar-butt stocks."

For the uninitiated, a cigar-butt stock is a rundown issue that has only one or two "puffs" left in it.

If this strategy is starting to sound familiar, it's because the world's best-known investor, Warren Buffett, used a similar strategy to build his investment empire. Buffett purchases only companies with strong cash flows, high barriers to entry, a competitive moat, strong management, and a proven track record of success.

Kantesaria's approach is cut from the same cloth — and his swelling asset base suggests similar success.

Like Buffett, Kantesaria is also not concerned with the day-to-day fluctuations of the market, trade war, elections, or interest rates. His long time horizon leaves him immune to short-term hiccups and emotional market swings, things to which many investors often fall prey.

In addition to the attributes above, Kantesaria also assesses the company's pricing power and volume growth as well as whether the product or service is essential and how nimble the cost structure is.

Some of his favorites are Fair Isaac (FICO), Moody's (MCO), Visa (V), and Mastercard (MA).

Once he buys, he holds for at least 10 years unless it reaches full value or a risk value changes.

"I'm actually not concerned with anything on the equity side," he said. "If you're a long-term optimist about America and our economy, then I think today is a great entry point for the long-term investor."

He concluded: "Despite almost a 10-year bull market in equities, despite a positive year-to-date performance in equities, we're quite bullish on owning equities today."

SEE ALSO: 'Some kind of warning sign': The CEOs of Bank of America and Blackstone sound off on the anomaly of subzero borrowing costs and the effect it's having on the economy

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• Carlson Capital's two multi-strategy funds — Black Diamond and Double Black Diamond — have returned just 2.5% and 1.4% this year through the end of October, an investor document shows. 
• The firm has also lost two portfolio managers recently, including real-estate investor Matt Adams and healthcare PM Rob Gupta, who joined Millennium.
• Its hedge fund assets overall stand at roughly $4.8 billion — roughly 40% less than the $8.2 billion the firm began 2018 with. 
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Carlson's tough 2019 continues. 

To start, the firm has seen a string of investment talent departures. It's the latest in what has been a volatile few years for Clint Carlson's 26-year-old hedge fund, which has included a roughly 40% drop in assets since 2018 to $4.8 billion as of the end of October.

Real-estate portfolio manager Matt Adams, healthcare portfolio manager Rob Gupta, managing director Narvir Sidhu, and mortgages trader Gary Helene have all left the firm in the last couple of months, sources tell Business Insider.

Gupta has joined Millennium's Arch Rock Management, while Sidhu is now a portfolio manager for Segantii Capital Management in London, according to their LinkedIn profiles. The departed employees either did not respond to requests for comment, could not be reached, or declined to comment. 

And the Dallas-based hedge fund manager's two flagship multi-strategy funds — Black Diamond and Double Black Diamond — finished October up 2.5% and 1.4%, respectively, for the year so far, according to an investor letter. Meanwhile, the average hedge fund has returned more than 7% and the stock market is up double-digits. 

Carlson declined to comment. 

A source close to the firm said that Carlson Capital has around 150 people total at the moment, and recently hired Adam Bernstein and Greg Thomas as portfolio managers.

Bernstein had spent 10 years at Glenn Dubin's Highbridge before starting his own fund, Pagoda Asset Manager, in 2014; he rejoined Highbridge in 2018. Thomas ran the Blackstone-backed Carbonado Capital before joining Carlson. 

The firm's assets have tumbled over the last three years, as the fund was plagued by poor performance in 2017 and key personnel departures in 2018 and 2019. After starting August of 2017 with $9.1 billion in AUM, Carlson Capital lost nearly $1 billion in assets in the last five months of that year. 

The firm's performance did bounce back in 2018, a year where the average hedge fund lost money thanks to a  fourth-quarter whipsaw in markets. Both flagship funds were up, returning roughly 2.5% each, but the firm also saw departures of its head of fixed income, chief risk officer, and treasurer during 2018. 

This year, Carlson Capital saw investors redeem from its stock-picking Black Diamond Thematic fund after one of the fund's portfolio managers, Matthew Barkoff, left the firm in January. The fund's assets have dropped more than 90% from its peak of more than $1 billion in 2017, an investor document shows, with current assets at $71 million. 

The firm's hedge fund assets overall stand at roughly $4.8 billion — about 40% less than the $8.2 billion the firm began 2018 with. 

While the firm's flagship funds have lagged competitors like Citadel, Balyasny, Millennium, Point72, and others this year, its single-strategy funds, including the aforementioned Black Diamond Thematic, have outperformed the firm's mainstays. 

The event-driven option, known as Black Diamond Arbitrage, has made 4.59% so far this year. Black Diamond Relative Value is up 8%, and Black Diamond Thematic has been the best out of all the funds, with a 10.24% return.  

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• Two Sigma has started selling software geared toward helping allocators of assets, such as pensions, endowments, and family offices, get forward-looking insights into the risks in their portfolios.
• The $60 billion hedge-fund firm Two Sigma is the latest to spin off its expertise into a product or service it can sell.
• Jake Dwyer, the general manager of Venn, told Business Insider that it's a massive addressable market, with over 30,000 firms managing more than $70 trillion in assets.  
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One of the world's preeminent quantitative hedge-fund firms is spinning out its data expertise into a product directed at helping others better understand their investment allocations. 

Two Sigma has just announced the wide release of Venn — software geared toward helping allocators of assets, such as pensions, endowments, and family offices, get forward-looking insights into the risks in their portfolio through data analysis. 

Jake Dwyer, the general manager of Venn, told Business Insider it's a massive addressable market, with over 30,000 firms managing more than $70 trillion in assets. 

And even though it's the first time Two Sigma has marketed an investment-management product to outside clients — a trend that is increasing popular among hedge funds — Dwyer said it represented a "sizeable market opportunity" and a "really meaningful driver" for the $60 billion firm.

"We think this has the potential to be a significant business for us," Dwyer said. "Our cochairs and founders are not interested in entering new markets that we don't feel like we have the opportunity to have a significant impact or that has the opportunity to really move the needle for Two Sigma as a whole."

Hedge funds are increasingly looking to diversify their revenue

Venn is the latest in a long line of products and services hedge funds have started pitching as they search for additional revenue streams. From the high cost of data to the recent low-fee environment and uninspiring returns, money managers' profit margins have continued to erode.

As a result, investors have spun out offerings based on their areas of expertise. Examples include Winton Group and Brevan Howard creating businesses around artificial intelligence and data collection.

Dwyer said Venn's launch didn't come out of concerns over changing market conditions for hedge funds, adding that the strength of the core investment business allowed Two Sigma to push into new growth areas.

"We look at this as one of the many big bets that we are making at any given time," he said. "This is just another big opportunity that we see that we can enter into a space that our expertise plays well in."

From internal tool to business opportunity

Venn is the product of a push to meet current clients' evolving needs, as is often the case. Investors in the hedge fund wanted to take a more quantitative approach to their asset-allocation process, Dwyer said. 

Word of the offering began to spread to noninvestors that were interested in the same capabilities. By 2019, Dwyer said, the firm recognized there was a commercial opportunity among asset allocators who were resource-constrained and looking for a better way to manage their investments. 

"When you look at the software tools that they are leveraging to manage these massive pools of capital, it's just not at all up to the same standards as people who are managing much smaller pools of capital on the asset-management side," Dwyer said. 

Over the summer, Two Sigma launched an invite-only version of the product. It attracted more than 200 investors, including Brown University and Prudential Financial, representing more than $5 trillion in assets under management.

Customers can access a less-customizable form of Venn for free, but Dwyer said more than half of those that have signed up have opted for the subscription-based version. 

The immediate focus of Venn is large asset allocators, but Dwyer said some fellow hedge funds have shown interest in the product. It's a tricky dynamic, as Two Sigma would be selling a product directly to some of its perceived competitors.

Dwyer said the firm has taken all the necessary precautions to ensure data from clients that is seen and handled by the Venn team can't be leaked back to the investing arm of the firm. The Venn team sits in a separate, walled-off environment with the software running on an independent public cloud. 

"The was a really important thing for us to establish early and develop that trust with people," Dwyer said. "To ensure that people are confident that the data they're providing us — since we're known as a data-focused company — wasn't going to be used for any other purposes."

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• Renaissance Technologies, the enigmatic hedge fund founded by Jim Simons, delivered unheard-of returns for 30 years.
• The firm employs a quantitative and systematic approach to investing that looks to exploit different market patterns, sequences, relationships, and anomalies. 
• The firm charges a sky-high 5% management fee and a 44% performance fee.
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As an investor, the idea of a fund generating 66% annualized returns (before fees) over a 30-year period seems nothing short of preposterous.

After all, conventional wisdom says that markets are efficient, competition is steep, and opportunities for outsize gains present themselves only once in a blue moon.

But that's exactly what Renaissance Technologies — the quantitative hedge fund founded by the math whiz Jim Simons— has accomplished. What's arguably even more impressive is that Simons and his subordinates knew almost nothing about business when they got into it. It simply didn't matter.

In Gregory Zuckerman's new book, "The Man Who Solved the Market," readers are given a peek into the inner workings of one of the most secretive and successful hedge funds the world has ever seen — one that started on a whim.

Simons' story began long before he revolutionized the investment world, when he spent his days cracking codes for the National Security Agency and teaching math at Stony Brook University.

"I was immersed in mathematics, but I never felt quite like a member of the mathematics community," Simons said. "I always had a foot [outside that world]." 

After growing tired of academia, he decided he'd try his hand at investing. New challenges never seemed to faze him, and Simons wanted to apply his mathematical aptitude to the world of finance.  

Simons' background — steeped in pattern recognition and code cracking — wound up transferring into an investment approach that was different from anything Wall Street had seen before.

Instead of analyzing balance sheets and business metrics, he spent his time scouring pricing data, looking for any inkling of a pattern, relationship, sequence, or anomaly buried in the numbers. 

Simons' search was unrelenting. Historical data was sequestered into tiny fragments, vetted tirelessly for potential opportunities, back-tested, and then applied to emerging trends in order to verify usability. The firm referred to these finds as "nonrandom trading effects" and hoped to take full advantage of these relationships in their model.

Peculiarities that the firm uncovered included:

• prices falling for certain investments before economic reports, and rising directly after
• Monday's pricing action following that of Friday's, while Tuesday's pricing action would revert to earlier trends
• the "24-hour effect," in which pricing action in the previous day would predict the action in the next.

It's important to note that trades based on the scenarios above worked only some of the time. However, as long as the strategy was more successful than not, profits would keep growing.

Returns were nothing short of ridiculous. 

Amid the tech bubble — the period between 2000 and 2002 when markets were melting down — Simons' bellwether Medallion fund garnered returns of 128.1% in 2000, 56.6% in 2001, and 51.1% in 2002, before fees.

"We make money from the reactions people have to price moves," an employee of Renaissance Technologies said.

Splitting trading into 5-minute 'bars'

In time, Simons and his subordinates would carve the trading day into five-minute "bars" as part of their constant search for new ideas. 

In his book, Zuckerman demonstrates the level of granularity present in the Renaissance Technologies' vetting process. 

"Did the 188th five-minute bar in the cocoa-futures market regularly fall on days investors got nervous, while bar 199 usually rebounded?" Zuckerman wrote. "Perhaps bar 50 in the gold market saw strong buying on days investors worried about inflation but bar 63 often showed weakness?"

Once a thesis was developed to better understand this pricing action, an algorithm was built to predict where prices would move in the future. Though this practice may seem easy to employ in theory, it incorporated large swaths of data points, complex mathematical models, and tons of computational force.

Simons' differentiated approach to investing removed all potential for emotion and human error. Buys and sells were executed automatically. Various algorithms and lines of code parsed through millions of variables to apply trades best suited to take advantage of the prevailing environment.

But even with all of that under consideration, it's important to note that Simons didn't find success overnight — nor did he develop his firm's proprietary models alone. He tapped into a vast network of pioneering mathematical minds in order to keep one step ahead of the competition.

Ultimately, his ability to harness the intellectual prowess of his peers was the driving force behind Renaissance's jaw-dropping returns.

SEE ALSO: A renowned market bear says stock valuations remind him the Great Depression and tech bubble — and warns of an ominous 'Hindenburg' tipping point

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• The Global Credit Opportunity Fund is PIMCO's flagship hedge fund, and runs more than $3 billion. 
• The fund has lost more than 14% this year, sources said, after making money last year.  The average hedge fund has meanwhile lost 4%. 
• The fund is run by Dan Ivascyn, the chief investment officer of the bond giant, and Jon Horne, a managing director at the firm. The fund has made money in four of the last five years. 
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The flagship of Pacific Investment Management Company's hedge fund suite has dropped by more than 14% this year, according to several sources.

The Global Credit Opportunity fund, which manages more than $3 billion in assets, lost roughly 1.75% in October to bring its year-to-date losses to more than 14%. The fund is run by Dan Ivascyn, who replaced PIMCO founder and billionaire Bill Gross as the firm's chief investment officer, and Jon Horne, a managing director that joined the massive fixed-income manager in 2006. 

The Global Credit Opportunity fund had managed to avoid losing money for several years. Last year, when the average fund lost money, the flagship fund returned nearly 9%. The only year since 2014 that the fund hasn't finished with positive returns was 2017, when it broke even. 

The firm declined to comment on the performance of private funds. 

Another fund in the firm's hedge fund suite, Tactical Opportunities, is up nearly 6% for the year. It's managed by a team including Ivascyn, managing director Josh Anderson, and managing director Alfred Murata. The fund also runs more than $3 billion. 

Ivascyn's troubles this year extend to PIMCO's retail products as well. Reuters reported in August that the massive PIMCO Income Fund, which currently manages $131.2 billion, was lagging its peers thanks to some bad bets on mortgage-backed securities and Treasuries. 

In comments to Reuters in August, Ivascyn said the firm is willing to take losses in the near-term if it believes in the investment idea.

"We believe that corporate credit is fundamentally weak and could overshoot to the downside if the economy deteriorates," he said to Reuters. "We also think developed government bond yields are too low and could easily reverse so we are comfortable with low rate exposure."

The fund currently lags the average fund in its Morningstar category by more than 2%, and is behind 86% of its 308 peers. On a ten-year basis however, the biggest bond fund in the world, and one of the largest actively managed funds regardless of asset class, is still best-in-class. 

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• Short-seller Carson Block is moving his hedge fund to New York, and says he wants to add to his seven-person strong team. 
• A source close to the fund told Business Insider that Block's Muddy Waters hedge fund is up about 12% this year. He also crushed it last year. 
• 2019 marks a year where Block has "giving a lot of thought to how to communicate often complex concepts, in a way that keeps the audience engaged."
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Short seller Carson Block has had quite a year.

In an equity bull market that has been brutal on short sellers, a source told Business Insider that Block's Muddy Waters Capital fund is up about 12% for the year to November, outpacing the 8.6% average gain for hedge funds so far in 2019.

Muddy Waters returns could end up even higher, helped by the announcement Tuesday of a short position in London-listed healthcare firm NMC Health. His fund was up last year, too, in a particularly hard year for hedge funds. 

Block says he's looking to expand — planning to move offices in the summer from San Francisco to New York and add about three more hires.

"We're looking to add strategies where they make sense," Block told Business Insider in an interview. "The selling point is our culture," which he describes as activist-minded and tight-knit, with a knack for "looking at the world through a contrarian lens."

Block wants applicants who are "very sophisticated, anti-establishment," and "oddball people" to join his seven-strong team at Muddy Waters.  

'Moneyball'

"There's a real 'Moneyball' type thesis on talent in the investment industry," he said, referring to the 2003 Michael Lewis book about a baseball coach who uses a mathematical system to outsmart teams in recruiting players. "Certain things are greatly overvalued — appearance, pedigree. The sell-side has consolidated, its become a lot more button-down and boring. There are people who don't fit in, who can't talk about sports, these are people who are overlooked and undervalued."

"Not to say that we're not a home for someone who has a pedigree and does look the part, but I'm most interested in finding people who for some reason don't fit in with the highly institutionalized world." 

"The ultimate person that we're looking for is probably working at large firm and doesn't get that much attention," he said. "That's one of the types of people we'd like to identify."

The hiring goals align with a shift in Block's messaging lately. Activist short sellers bet against a stock, then typically release a report criticizing the company, banking that their arguments will compel investors to sell. If the stock goes down, the short seller profits. 

But in a media landscape dominated by Twitter, TikTok, and Instagram, Block said he's rethinking that process — "giving a lot of thought to how to communicate often complex concepts, in a way that keeps the audience engaged."

Faux ceremony with Stormy Daniels 

Case in point: Earlier this month, he co-hosted a faux awards ceremony with adult actress Stormy Daniels, called "The Fidouchies," which made "serious points in a non-serious way."

It was raunchy, Business Insider's Bradley Saacks wrote after the event, chock full of f-bombs, flying dildos, and expletive-laden barbs aimed at corporate titans including Elon Musk and Larry Fink. 

It's not the only big change this year.

Showing, not telling

In Europe, dogged by persecution of short sellers, Block lets his trades do the talking. In June, Muddy Waters put a $6.7 million short bet on Solutions 30, a French IT company. The position was disclosed via a regulatory filing, which was enough to send the shares tumbling.

But, unusually, the disclosure wasn't accompanied by a critical report, or any criticism at all, from Block.

It was a clever way of avoiding critics by letting his trades do the talking. Block told Business Insider at the time: "By showing we're short, we hoped the smart money" would do its homework, and find "some of the same issues we did."

Also this year, Block posted on the fund's website a 12-minute documentary detailing his criticism of French retailer Casino, which examines the fund's battle against the company and French regulators after shorting Casino's shares back in 2015.

Fake swag bag 

Another example: He trolls companies on YouTube. Block last month posted on a video of a Muddy Waters staffer pranking partygoers on their way into a 10th anniversary party for Burford Capital.

Guests received mock swag bags that included a "margin-call stress ball" and a "Burford creative writing and accounting pad." Block has said he shorted Burford, a London-listed litigation finance firm, because of questionable accounting. Burford has denied the claims. 

Staying relevant

The new tactics are his evolving form of activism, he says. As young people flock to the start-up scene amid a loss in cache among finance firms, Block says there's a place at Muddy Waters for those who want to make a difference. 

"I'm best equipped to clean up problems," he said. "I grew up in capital markets — my fund functions well for the business that I'm in. The capital markets are the best place for me to be an activist."

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• The Horseman Global Fund, run by the career contrarian Russell Clark, lost 35% in 2019, its worst year ever, Bloomberg reported Thursday.
• The record loss was driven by Clark's bets against the longest-ever bull market. The S&P 500 gained 29% last year, its best performance since 2013.
• Now Clark is in a race against time to save the fund, which had about $241 million in assets at the end of November, down from the $1.7 billion it held in 2015, Bloomberg reported.
• Read more on Business Insider.

Russell Clark's hedge fund, the Horseman Global Fund, had a record bad year in 2019 after betting against the bull market.

The fund plunged by 35% in 2019, its worst year ever, Bloomberg's Nishant Kumar reported Thursday. A Horseman Capital Management representative confirmed the number.

The fund's performance faltered because of Clark's continued contrarian bets. Since 2012, he's held a short position against equities, betting that a stock-market crash was ahead.

But has crash has yet to come. Even as the S&P 500 posted multiple fresh highs this year, Clark dug into his position — in October, he boosted the net short position in his fund to 111% of gross assets, according to a letter to investors.

That bet did not pay off, as the S&P 500 gained 29% in 2019, its best return since 2013. The fund, which held as much as $1.7 billion in assets in 2015, had $241 million at the end of November, according to Bloomberg.

Clark's fund is now in a race against its dwindling assets, Bloomberg reported. This year, the hedge-fund industry saw more closures than openings for the fifth year in a row, spurred by investors looking for cheaper vehicles to capture the bull market's record run.

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