• Greenlight Capital, run by David Einhorn, gained 14% in 2019, Bloomberg reported Monday. The S&P 500 gained 29% in the same year. 
• While the hedge fund trailed the broader market, it rebounded from 2018 when his main fund lost 34%.
• Einhorn's short positions on Tesla and Netflix may have weighed on his yearly returns in 2019. 
• Read more on Business Insider.

David Einhorn's Greenlight Capital trailed the S&P 500 in 2019, but still ended the year in the green after its worst performance ever in 2018. 

Greenlight returned nearly 14% in 2019 after dipping 0.3% in December, Bloomberg reported Tuesday. The S&P 500 rose 29% in the same year, posting its best annual performance since 2013.

His main fund had declined 34% in 2018, the worst performance since its creation in 1996. After, Einhorn called 2018 "the year where we didn't get anything right" and reworked his portfolio at the start of 2019.

Still, a few of Einhorn's notable short bets may have weighed on returns in 2019. He's had a long-time short wager against Tesla, which rallied 26% in 2019. He is also short Netflix, which gained nearly 21% in the same timeframe. 

Short bets also weighed heavily on Russell Clark's Horseman Global Fund, which plunged 35% in 2019. It's the latest in a rough time for the industry, as more funds have closed than opened for the fifth year in a row. As the record bull market trudges on, investors are dumping hedge funds in favor of cheaper investment vehicles that capture better returns. 

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• Lansdowne Partners is one of Europe's largest investment firms, with $1.2 billion allocated toward energy alone.
• While solar is the fastest growing source of renewable energy, Per Lekander, who manages Lansdowne's energy fund, says he's betting on wind instead. 
• "I should probably be more bullish on solar, but I'm not," he told Business Insider. "I'm way more bullish on wind." 
• There's a good reason to trust him: His clean-energy portfolio surged 37% last year, besting the broader stock market, according to an HSBC hedge-fund report.
• Click here to subscribe to Power Line, Business Insider's weekly clean-energy newsletter.
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Over the next five years, global renewable-power capacity is expected to double, according to the International Energy Agency. Solar energy alone accounts for 60% of that projected growth. 

That's why it's surprising to hear that Per Lekander, a partner at Lansdowne Partners — one of Europe's largest hedge funds — is placing big bets on wind energy over solar. 

"I should probably be more bullish on solar, but I'm not," Lekander, who has been with the firm since 2014, said. "I'm way more bullish on wind. I think it's my highest conviction."

Lekander declined to share details about the firm's investments on the record, but he indicated that it has positions in wind companies overseas.

There might be a reason to trust his judgment: The $221 million long-only clean-energy fund he manages surged 37% in 2019, besting the broader stock market, according to an HSBC hedge-fund report. 

So why wind over solar? 

Solar is a fragmented industry dominated by companies in China 

Solar is the fastest-growing renewable energy, according to the Center for Climate and Energy Solutions. In the US, it's projected to supply nearly half of all renewable energy by 2050, up from 11% in 2017.

Lekander doesn't deny the impending explosion of solar. 

"I believe that solar is going to grow quicker than wind, at least for the next few years," he said. 

It's easier to develop solar projects, relative to wind farms, he said. There's not as much NIMBY-ism — short for "Not in my backyard." Plus, solar is far cheaper than offshore wind, according to the International Renewable Energy Agency.

But Lekander said there were a few major drawbacks. For one, he said, Chinese companies have a huge share of the market in solar manufacturing. Solar energy is also a "fragmented" industry, he said. 

"There are many, many players," he said. "I struggled to find companies which have really differentiated business models. I'm not saying I'm negative on solar — because the demand is just too strong — but it's a commodity business for now."

Then there's wind. 

The wind industry is older and more consolidated 

The first electricity-generating wind turbine was built in the late 1800s. Sure, it probably looked nothing like the mammoth turbines of today, but it supports Lekander's point: The wind industry is old, and that has given it more time to consolidate.

"You're getting into industry consolidation, with a few leading players, and you're really starting to have differentiated business models," Lekander said.

In 2018, just four manufacturers deployed nearly 60% of the turbines: Vestas, Goldwind, General Electric, and Siemens Gamesa, according to BloombergNEF. 

Plus, wind energy is better positioned for recurring profits, Lekander said, because unlike solar panels, wind turbines need to be regularly serviced.

"There is recurring business, which is not that easy to accomplish," he said.

With the choice of onshore versus offshore wind, Lekander's bets are on offshore, with a five-year outlook, because wind at sea often avoids the NIMBY problem, he said, and "you can have monstrously big turbines."

No matter the type of energy, however, Lekander said renewables were bound to explode. 

"Our view is that this is going to go way further than people think," he said. "The speed is just massively accelerating."

This story is part of Business Insider's expanding coverage of clean energy. Do you have a tip about startups or investment firms in the industry? Please contact this reporter at bjones@businessinsider.com or through the confidential messaging app Signal at 646-768-1657. 

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• In a year where active management struggled, Bill Miller's hedge fund returned 120% in 2019, Bloomberg reported Thursday.
• Miller's hedge fund left the names in its basket untouched in the last quarter, Miller said in a letter to investors reviewed by Bloomberg.
• Miller expects the stock market bull-run to continue into 2020.
• Visit Business Insider's homepage for more stories.

The typical hedge fund failed to post returns in the double-digits, much less beat the S&P 500, in 2019. But Bill Miller's fund capped off the year with what is a comparatively astronomical 120% rise, Bloomberg reported Thursday.

In a January 15 letter reviewed by Bloomberg Thursday, Miller told investors that the hedge fund, Miller Value Partners 1, spent the fourth quarter doing something that sounds counterintuitive for an actively managed fund: "nothing." In those months, the hedge fund gained 60%, Bloomberg reported.

"This doesn't happen as often as it probably should," Miller wrote, adding that the fund did not add any new companies nor exit any of its holdings during the last months of 2019. Instead, it held a mix of companies from household names like Amazon, to small-cap biopharmaceutical firm Flexion Therapeutics. Amazon gained 23% in 2019, while Flexion stock gained 83% in 2019. 

Miller's fund outpaced the S&P 500 by a longshot, but that's a fortune that escaped many other value-based investors last year. The average hedge fund returned 9% in 2019, according to Bloomberg Hedge Fund Indices, while the S&P 500 returned 29%, Bloomberg reported. In mutual funds, Bill Nygren's value-based investing strategy led him to underperform the S&P 500 in 2019 for the third year in a row.

Part of Miller's approach involves leverage: The fund will lever anywhere between one and three times its investment, Bloomberg reported.  

Miller gained attention on Wall Street by beating the S&P 500 for 15 years straight, through 2005. The financial crisis ended that record, and Miller left Legg Mason Inc., the same firm at which he made his name, in 2016. 
 
In an earlier January 6 letter, Miller predicted that the 2020 stock market points in the same direction as 2019. "The path of least resistance for stocks remains as has been for a decade: higher," he said.

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• Billionaire Glenn Dubin is retiring from the hedge fund space, he told Reuters on Friday. 
• He'll relinquish his role and equity in quant fund Engineers Gate, which he founded in 2014, in the next week and focus on direct investing. 
• Dubin told Reuters the decision had nothing to do with his family's ties to convicted sex offender Jeffrey Epstein. Last month, Business Insider detailed how the relationship between Epstein and the Dubin family was much more complex than previously known.  
• Visit Business Insider's homepage for more stories.

Billionaire Glenn Dubin is stepping back from the hedge fund industry to invest in private markets, a decision he said has nothing to do with his family's connections to Jeffrey Epstein, he told Reuters on Friday.

Dubin is the founder of multiple funds, including Highbridge Capital Management and, most recently, Engineers Gate, and has worked in hedge funds for 40 years. Now, he'll focus on his family office and other activities. 

He told Reuters his decision was unrelated to media reports about his family's connections with Epstein, who was a convicted pedophile.

Last month, Business Insider published an investigation detailing how the relationship between Epstein and the Dubin family was much more complex than previously known. In August, Business Insider highlighted the family's social, philanthropic, and financial ties with Epstein over decades, including hedge fund investments made before Epstein went to jail in 2008 on charges including procuring a minor for prostitution. 

Since the summer, Dubin and his family have declined to speak publicly about their ties with Epstein. In an interview with Reuters, Dubin called news coverage "false." 

From investment manager to investor

New York-based Engineers Gate, like many hedge funds, has struggled with returns that lag those of the broader market. Reuters reported it's returned about 5% after fees over the last four years. The S&P 500 returned 11.9% annually over the same time. 

Now, Dubin is returning his equity stake in the company – he invested about $100 million in 2014 – and turning over leadership to Greg Eisner. The new CEO seeks to double the firm's $1 billion in assets, per Reuters, which reported the firm has about 90 employees. 

"It has always been my intention to pass the reins to the next generation of leaders at the right time and, as part of that plan, Greg has in essence been the acting CEO of Engineers Gate for the last few years," Dubin wrote in a Friday email to staff reviewed by Business Insider. "In a sense, after forty years, I am looking forward to transitioning from being an 'Investment Manager' to an 'Investor.'" 

Dubin's media representatives provided the letter to Business Insider and declined to comment further.

Dubin wants to be on boards and to invest in operating companies through his family office, Dubin & Co, he told Reuters. 

Before Engineers Gate, Dubin cofounded Highbridge Capital Management with childhood friend Henry Swieca in 1992. JPMorgan bought a majority stake in the manager in 2004 and then acquired the rest of the firm in 2009. In June, Business Insider reported Highbridge was winding down its $2 billion multi-strategy fund to focus on the credit business. 

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• The threat coronavirus poses to global markets "certainly ruined the environment" for long-term investors, Appaloosa Management founder David Tepper told TheStreet on Saturday.
• The billionaire told CNBC just two weeks ago that he and his hedge fund "have been long and continue that way."
• Tepper also warned against taking additional risks until the outbreak subsides, saying "if you're a long-term person, you better not be leveraged."
• Visit the Business Insider homepage for more stories.

David Tepper told CNBC on January 17 that he and his hedge fund "have been long and continue that way." Two weeks later, the billionaire investor is warning of new risks in such positions.

US stocks have tumbled from their record highs as coronavirus fears grip investors, and uncertainty around the outbreak could keep markets from recovering in the near term, the founder of Appaloosa Management told TheStreet on Saturday.

"Certainly ruined the environment of the set up right now," Tepper said. "You'll have to be careful because it may be a game changer. So you just gotta be cautious."

The outbreak is already responsible for more than 360 deaths as of February 3, and more than 17,400 people are infected. A man in the Philippines became the first to die of the virus outside of China on Saturday.

Economies around the world are also taking hits from the virus. China is reportedly eyeing a cut to its 2020 growth forecast as the outbreak's rapid expansion through the country prompted factory closures, quarantines, and travel bans. JPMorgan analyst Haibin Zhu lowered his first-quarter China GDP estimate to 4.9% from 6.3% on Wednesday.

Chinese stocks tanked as much as 9.1% on Monday as trading opened for the first time since January 23. US futures generally ignored China's sell-off, with all three major indexes up at least 1.1% following a Friday tumble.

Tepper noted that investors holding on to their long positions should avoid any additional exposure until virus-related risks cool.

"If you're a long-term person, you better not be leveraged," the billionaire said.

The fund manager announced in 2019 that he would return capital to investors and convert Appaloosa to a family office in the near future. The fund holds about $14 billion in assets under management, according to CNBC.

Following the fund's conversion, Tepper plans to focus on the Carolina Panthers, an NFL team he recently bought. He's also backing the creation of a Major League Soccer team in Charlotte, North Carolina.

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• Ken Griffin, the founder of the $32 billion hedge fund Citadel, considers a jump in US inflation to be among the biggest risks to financial markets and says the country shows "absolutely no preparedness" for such an event.
• The billionaire noted that "even our most well-informed policymakers" could miss key warning signs for a rise in inflation.
• US inflation sits at 1.6% and hasn't consistently hit the Federal Reserve's 2% target in years.
• Griffin also deemed the coronavirus outbreak "the most concrete short-run risk we see in the financial markets globally."
• Visit the Business Insider homepage for more stories.

A rise in inflation is among the biggest risks to financial markets today, and the Federal Reserve could miss critical warning signs, the hedge fund billionaire Ken Griffin said Thursday.

Inflation has remained relatively stagnant for years, rarely landing above the Fed's 2% target or low enough to drive fears of price deflation. Markets have generally priced in a lack of rapid inflation, leaving the US with "absolutely no preparedness" for such a jump, Griffin, who founded the $32 billion hedge fund Citadel, said at The Economic Club of New York.

"If there were inflation, the markets are utterly and completely unprepared for that," Griffin said.

The Citadel founder recalled when his fund pored over Fed minutes in the months before the central bank began raising interest rates. The minutes lacked any signs of rising inflation just six months before the Fed initiated upward rate adjustments, revealing "even our most well-informed policymakers" could miss inflation warnings, Griffin said.

The central bank's preferred metric, the personal consumption expenditures price index, currently sits at 1.6% and is expected to rise only to 1.7% over the next decade. A trio of rate cuts through the second half of 2019 helped deliver economic stimulus during the peak of the US-China trade war, but the Fed has since signaled it won't adjust its benchmark rate further until inflation meets its target.

Read more: Griffin explains why he modeled Citadel after Goldman Sachs' analyst program — and says future leaders can't expect a 9-to-5 lifestyle and a 'great weekend'

Griffin also pointed to the coronavirus outbreak as "probably the most concrete short-run risk we see in the financial markets globally."Several major companies have already faced supply-chain hurdles, lowered forward guidance, or closed hundreds of stores in response to the epidemic, and the virus has accelerated its infection rate through February.

The founder noted that containing the outbreak would be "a challenge for the world to navigate" and specified that it could also cut into China's ability to meet its obligations in the phase-one trade deal with the US. China agreed to boost its imports of US goods by $200 billion over the next two years, but the coronavirus has dented demand.

Griffin said the White House should empathize with China's situation and allow leniency in enforcing the month-old trade agreement.

"I hope the administration takes the high road here and understands that the Chinese are grappling with what is the tip of the spear of a global health crisis, and we make good, thoughtful decisions on how to navigate that," he said.

Griffin is worth $15.5 billion, according to the Bloomberg Billionaires Index.

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• Hedge fund billionaire Ken Griffin expects direct listings to grow even more popular in 2020, but noted that not all firms are meant for the unconventional approach to public markets.
• Companies eyeing direct listings need "a well-established brand," a large shareholder base, a profitable or nearly profitable business model, and no need for new capital, Griffin said at the Economic Club of New York.
• The Citadel founder expects "a handful of direct listings from some of the very big, successful tech startups" in the near future, but also sees the traditional IPO market still retaining the "significant majority" of public debuts.
• Visit the Business Insider homepage for more stories.

Citadel founder Ken Griffin sees direct listings growing more popular in 2020 as firms opt for the initial-public-offering alternative, but he doesn't think the practice is for everyone.

The companies undergoing direct listings in 2020 will already be household names and need to meet certain criteria should they want to succeed as public ventures, the billionaire hedge fund manager said on February 6. Any company in a growth-at-all-costs or research phase should stick to a traditional IPO, Griffin noted, but those with stable underpinnings and strong public standing may drive new interest in direct listings this year.

"For a company that has a well-established brand, that has a broad shareholder base, that has a business that is profitable or nearing profitability, that does not need to raise capital, they're not trying to raise new money, a direct listing is an incredibly efficient way to go public," Griffin said at an event hosted by the Economic Club of New York.

The IPO market was marred by worse-than-expected performances and last-minute cancellations through the second half of 2019. Uber, Lyft, and Peloton all wiped out swaths of investor capital in their first days of trading, and highly anticipated IPOs including WeWork's were put on hold as scrutiny for public debuts intensified.

The fallout from underperforming IPOs fueled interest in direct listings, which allow firms to begin trading on public markets without raising new capital through a stock offering. Companies pursuing such an endeavor avoid paying millions of dollars in underwriting fees, and their market values aren't watered down by the issuance of new shares.

Airbnb is among the unicorn startups eyeing a 2020 direct listing, and well-known firms have already proven the unconventional method's success. Spotify and Slack used direct listings to go public, with both companies using Griffin's Citadel Securities as a market-maker in their debuts. All direct listings that have gone public on the New York Stock Exchange have used Citadel Securities as the market-maker, in fact. 

Griffin expects the newer method to surge in popularity through 2020 as similarly large names make an even stronger case for the practice.

"I think we're going to see a handful of direct listings from some of the very big, successful tech startups," Griffin said. "And then we're going to continue to see a significant majority of all the capital raised in the IPO market raised in the traditional channel where primary money is being raised to further the interests of a business."

Several companies have already conducted, or announced plans for, public debuts in the year-to-date. Online mattress retailer Casper saw its stock jump as much as 32% in its first day of trading. Warner Music Group, the third-largest company in the surging music industry, filed its S-1 on February 6, marking its intention to go public in the near future.

The hedge fund founder also addressed markets' biggest risks during his interview. Griffin called US markets "utterly and completely unprepared" for a rise in inflation, and pointed to the coronavirus outbreak as "probably the most concrete short-run risk we see in the financial markets globally." Though China is obliged by the phase-one trade deal to boost its imports of US goods by $200 billion over the next two years, the White House should allow leniency in enforcing the month-old agreement, Griffin added.

The Citadel CEO is worth $15.5 billion, according to the Bloomberg Billionaires Index.

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• Investors expect to pull about $20 billion from hedge funds this year, according to a study from Goldman Sachs Group. 
• It would be the third year in a row the industry has seen annual outflows.
• Still, it would be a smaller loss than in 2019, when hedge funds saw $98 billion in outflows, according to eVestment. 
• There's also proof hedge funds are off to a better start in 2020 — funds outperformed the broader market in January, according to one hedge fund index. 
• Read more on Business Insider. 

Hedge funds are again expected to see net outflows in 2020, a foreboding sign after the industry saw consecutive outflows in 2018 and 2019. 

Net outflows from hedge funds in 2020 are expected to be about $20 billion, according to a study by Goldman Sachs that in December surveyed 444 allocators advising more than $1 trillion in assets. The bulk of the outflows are expected to come from pension funds, endowments, and family offices, according to the report. 

Hedge funds have come under increasing pressure from investors after years of underperformance. In 2019, the industry saw more closures than openings for the fifth year in a row. In the same year, while the S&P 500 returned 31%, the Bloomberg Equity Hedge Fund Index only gained 13%. 

In the last five years, hedge funds have underperformed a traditional 60/40 equity bond allocation for the first time since 1990, according to the report. Investors have dumped the funds in favor of cheaper investment vehicles taking advantage of the record bull market run. 

A majority of the allocators surveyed by Goldman said that underperformance could be pinned on challenging macro conditions including dovish central bank policies. But nearly half had another reason — they said that the industry has grown too large and that passive and quant strategies have made it harder to execute. 

Underperformance has changed the hedge fund landscape, according to the report. "Many allocators now focus primarily on the diversification benefits of hedge funds," Goldman Sachs wrote in the report. They're taking a very nuanced, surgical approach to the way they invest in hedge funds and are no longer considering them homogeneous asset classes, according to the report. 

And, while $20 billion in annual outflows is a lot, the estimate is an improvement over the industry's performance last year, according to the report. In 2019, investors pulled $98 billion from hedge funds, the largest outflow the industry has seen since 2016, according to eVestment.

There is also proof that the hedge fund industry is off to a solid start in 2020. The Eurekahedge Hedge Fund Index returned 0.08% in January, beating the broader market — the S&P 500 declined 0.16% in the month. 

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• Silver Ridge, the macro hedge fund run by former Citigroup currencies head Anil Prasad, will shut down, The Financial Times reported Wednesday.
• It's the latest high-profile hedge fund closure in an era of chronic struggle for the industry. More hedge funds have closed than opened for the past five years running.
• Star Ridge, which began trading in 2016, posted mixed performance during its short lifespan, but ended last year with a 17% gain.
• Read more on Business Insider. 

Former foreign-exchange heavyweight Anil Prasad will shut down Silver Ridge, his macro hedge fund, The Financial Times reported Wednesday.

Prasad, who was the global head of currencies at Citigroup before opening Silver Ridge Asset Management in 2014, is in the process of returning funds to investors, The Financial Times reported, citing people familiar with the matter.

It's a trying time to be a hedge fund. In 2019, hedge funds saw more closures than openings — the fifth year in a row that was the case. 2020 is not likely to be any easier, with Goldman Sachs predicting investors will pull $20 billion from the industry by the end of the year. Appaloosa Management, Moore Capital, and Arrowgrass are among the biggest hedge fund names that shut their doors to outside investment in 2019.

Silver Ridge's trading record was mixed. After raising more than $500 million to launch, the fund began trading in 2016 and posted slight gains that year, followed by a 10.8% return in 2017. But then it lost over 11% in 2018 after a bad bearish bet on the dollar, The Financial Times reported.

Last year Silver Ridge posted a 17% return — though assets under management were less than $400 million and the fund saw a major departure as Farhang Mehregani, a founding partner, exited, The Financial Times reported.

Silver Ridge declined to comment for The Financial Times' story and could not be reached immediately for comment. 

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• Citadel portfolio manager Prashanth Jayaram is launching his own fund, named Tri Locum Partners.
• Jayaram is a healthcare specialist, and has a medical degree from the University of Pennsylvania. 
• It is unclear how much he is planning to raise for the new fund. 
• Visit Business Insider's homepage for more stories.

Another one of Ken Griffin's portfolio managers is getting ready to set out on his own.

Prashanth Jayaram, who joined Citadel as a healthcare portfolio manager in 2015, is launching his own fund, sources tell Business Insider. The new venture is going to be called Tri Locum Partners, and the firm has already hired a head of investor relations and business development, Christabel Syham, who worked previously worked in a similar role at healthcare-focused Senzar Asset Management. Tri Locum, sources say, will be market-neutral. 

Citadel declined to comment. Jayaram did not respond to requests for comment. 

Jayaram will join the expansive Tiger family tree, since he also worked as an analyst at Lee Ainslie's Maverick Capital from 2009 to 2012. After that, he worked as an analyst for Citadel for two years before joining Millennium's Lion Arch Capital as a portfolio manager. But after a year at the Millennium-linked fund, he rejoined Citadel as a portfolio manager. 

Jayaram's education section of his resume is impressive, with a degree from both Wharton and the University of Pennsylvania's medical school, as well as the business school from the Hong Kong University of Science and Technology. He's also worked for McKinsey, Morgan Stanley, Penn's endowment fund, a division of AllianceBernstein, and founded a company to make it easier for doctors to find new research. 

It is unclear how much Jayaram is planning to raise for his new offering or when the fund will officially begin trading, but Citadel alumni have been raking in cash with new funds recently. Last year alone saw several billion-dollar launches, including Mike Rockefeller and Karl Kroeker's Woodline Capital and Richard Schimel and Larry Sapanski's Cinctive Capital. 

Bloomberg has also reported on two funds run by ex-Citadel employees, Brendon Haley's Holocene Advisors and Michael Cowley's Sandbar Asset Management, who have seen assets surge despite investors' overall displeasure with the industry. 

Despite the outflows facing the industry, healthcare funds have been an area investors are hoping to put more money in. A Jefferies report from 2019 noted while investors were turning away from generalist stock-picking funds, sector-specific funds that focused on healthcare or technology were still in demand. A recent study from Goldman Sachs found that healthcare, biotech, and technology and media were all in-demand sectors. 

Joseph Edelman's Perceptive Advisors' flagship fund soared more than 50% last year thanks to its biotech holdings, and Hedge Fund Research's healthcare fund index notched 17.44% returns in 2019 — a big improvement on the 9.5% the overall industry index returned. 

SEE ALSO: Julian Robertson's Tiger Management is at the center of a quarter-trillion-dollar web linking billionaires, the Pharma Bro, and a 'Big Short' main character

SEE ALSO: These are the 7 hedge fund managers to watch in 2020 as investors pull billions from the industry

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• Betting against stocks is paying off this week. 
• In the last week, Crispin Odey of Odey Asset Management has gained 5% in his European fund, he told The Financial Times.
• In the last seven days through February 26, Russell Clark's Horseman Global fund has gained about 6%, Bloomberg reported.
• Both gains are reversals from dismal annual performances in 2019, when the S&P 500 gained 29%. 
• Read more on Business Insider. 

Bearish hedge fund managers are reaping millions by betting against the market amid the fastest correction since the Great Depression. 

In the last week, Crispin Odey of Odey Asset Management has gained 5% in his European fund, he told The Financial Times. In the last seven days through February 26, Russell Clark's Horseman Global fund has gained about 6%, Bloomberg reported. The two funds manage almost $1 billion in assets. 

This week's rapid market descent is a swift reversal in a run of poor performance for hedge fund managers. In January, Odey's fund lost 11.2%, more than its 10.1% loss for all of 2019, spurred by short bets against Tesla. Clark's fund posted its worst year ever in 2019, shedding 35% on contrarian bets against the longest-ever bull market in a year when the S&P 500 gained 29%. 

But now, bearish bets against Tesla and US shale oil stocks are boosting Odey's returns, the FT reported. And, Clark's contrarian views are also paying off. In the last six days, the S&P 500 and the Dow Jones Industrial Average have fallen more than 10% amid fears that the coronavirus outbreak will hinder global growth. 

It remains to be seen if the fund manager's gains will lead to a better annual performance in 2020 after a dismal year for hedge funds in 2019, when more funds closed than opened for the fifth year in a row. So far, Odey's fund is down about 5% in 2020 despite the recent gains, according to the FT.

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• Dan McMurtrie and Alex Draime, co-founders of Tyro Partners, knew they wanted to start a hedge fund immediately after graduating from Notre Dame.
• Since inception in 2015, Tyro Partners has trounced the S&P 500's performance, garnering an 82.8% return with a concentrated, long-short, value-centric approach to investing.
• The duo focus on large secular trends, and bounce in and out of positions when incremental pieces of information either confirm or disconfirm a previously held belief.
• Today, they're highly focused on secular trends in affordable housing, education, and healthcare.
• Click here for more BI Prime stories.

While most 23- and 24-year-olds are starting internships and figuring out a career path, Dan McMurtrie and Alex Draime — co-founders of Tyro Partners— were starting a hedge fund.

"We looked at the conventional paths, and we saw a lot of people who had done the banking/private equity route and were a decade, or two decades into their career and still had never gotten the chance to take risk," said McMurtrie in an exclusive interview with Business Insider. "By the time we were graduating, we decided we wanted to put a fund together as soon as we could."

McMurtrie and Draime originally met at Notre Dame, where they headed the university's investment club.

But the pair quickly came to realize just how difficult it would be to get things off the ground.

"We put together $3 million to start from friends and family. We thought we were going to raise $10 million, only $3 million showed up," said McMurtrie. "A bunch of people at the 11th hour got cold feet and were like: 'Are we really going to give these 23- and 24-year-old kids money?'"

Today, those same individuals who had second thoughts on investing with McMurtrie and Draime are probably kicking themselves.

Since inception in 2015, Tyro Partners has garnered an 82.8% return, beating the S&P 500's return over the same timeframe by more than 14 percentage points. What's more, the duo has brought on Louis Parks, a 25-year Wall Street veteran as chief operating officer, in order to smooth out operational wrinkles and quell any of the "cold feet" behavior they'd previously encountered.

Presently, Tyro's assets under management are fast approaching $20 million.

Defying traditional logic

Conventional wisdom says that a diversified approach to markets lays the path to prosperity — and that's where McMurtrie and Draime ardently disagree. 

Core long positions at Tyro — or bets where an issue is expected to appreciate in price — top out around 10 to 15 selections, and generally make up 5% to 10% of capital. On the short side of Tyro's portfolio, 20 to 25 positions may be employed at a given time, ranging anywhere from 2% to 4% of total allocations.

"We like to find areas where there's a big, secular theme in an industry or a sub-industry and find the companies that are most able to take advantage of that secular shift for the long side," said Draime. "And for the short side, short those companies that are disadvantaged or are going to have a difficult time surviving in the environment that's changing."

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Today, trends such as affordable housing, healthcare, and education are top of mind.

"We look at the research process as really building a base of IP that we can tap for years going forward," said Draime. "Most of the trading that we're doing is stuff we did the research on months, if not years ago," McMurtrie added.

Because McMurtrie and Draime focus their efforts around secular trends, the research they conduct is expected to produce returns for 5, 10, or even 20 years. When significant dislocations in pricing or an idiosyncratic issue occurs, they're poised to take a position. 

McMurtrie says that the ways Tyro commonly creates alpha — the ability to outperform a benchmark — by employing this methodology is twofold.

1. A liquidity dislocation

"So a stock trades wild because of some validly scary thing, or validly very exciting thing," he said. "Basically, that's a mean reversion trade."

2. Confirming/disconfirming an original thesis 

"Or there's an incremental piece of information that confirms or disconfirms our macro-level thesis on a sub-sector." McMurtrie said. "A lot of times we'll actually buy stocks when they're going up because there's a piece of information that came out that makes us go 'oh man, now our whole thesis is for sure correct' — and the market realizes that it's good, so it's up 5% or 6% but this could actually double the value of the stock." 

At the end of the day, McMurtrie and Draime are cash-flow based, value-centric investors. They want to have a firm grasp of a company's unit economics, margin profiles, operating leverage, capital structure, and true discounted-cash-flow value of the business.

"August 1st will be five years, and we've had multiple volatility shocks, we've gone through different market regimes this year, and we've made it through it all," McMurtrie concluded. "We're here to stay, we made it work." 

SEE ALSO: An Ivy League professor who nailed the financial crisis says another 'colossal disaster' is on the way — and warns of a 50% market crash

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• A 30-day "extended Spring Break" shutdown is "the only answer" for saving the economy from a significant coronavirus-driven slowdown, the hedge-fund founder Bill Ackman tweeted on Wednesday.
• The government should keep only essential services open and pay wages during the period, he added.
• The "exponential compounding" of virus cases stands to threaten millions of lives and destroy the economy if drastic actions aren't taken, the Pershing Square Capital Management founder said.
• On Tuesday, the White House announced it was seeking a $1 trillion fiscal stimulus package that would include direct payments to Americans.
• Visit Business Insider's homepage for more stories.

President Donald Trump should institute a 30-day shutdown to avoid more "economic pain" from the coronavirus outbreak, the Pershing Square Capital Management founder Bill Ackman tweeted on Wednesday.

A prolonged stay-at-home period would curb defaults and foreclosures as the US economy faces its biggest challenge in years, the billionaire investor said. The government should keep only essential services open and pay wages during the unprecedented holiday, and rent, interest, and tax payments should be canceled over that month, he proposed.

"Mr. President, the only answer is to shut down the country for the next 30 days and close the borders," Ackman wrote. "Tell all Americans that you are putting us on an extended Spring Break at home with family."

The US has so far reported 115 deaths and more than 6,500 cases across all 50 states. The virus' ability to go undetected contributed to a spike in confirmed cases through March, and the country's exposure will continue to soar if action isn't taken immediately, Ackman said.

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"With exponential compounding, every day we postpone the shutdown costs thousands, and soon hundreds of thousands, and then millions of lives, and destroys the economy," he tweeted. "Please send everyone home now. With your leadership, we can end this now."

Other economies would likely follow the US if such drastic measures were put in place, he said, adding that a "global Spring Break will save us all."

The pandemic has already slashed economic activity through stay-at-home orders, business closures, and event cancellations. Numerous companies have lowered their revenue estimates for future quarters as the outbreak stifles demand and disrupts complex supply chains.

Banks including JPMorgan, Goldman Sachs, and Morgan Stanley recently updated their GDP forecasts to reflect a US economic recession starting in the second quarter as the number of infections surges and consumer activity grinds to a halt.

A national shutdown is "inevitable," but an immediate order to stay indoors, and therefore curb community spread, could cushion against the outbreak's economic impact, Ackman said.

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On Tuesday, the Trump administration announced it was seeking a $1 trillion fiscal stimulus measure, which would include sending checks to Americans, aimed at lifting families from severe financial pressure and keeping businesses funded through the demand shock. Nearly half of the planned assistance is already underway, the White House economic adviser Larry Kudlow said on Monday.

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• Valiant Capital Management, a hedge fund led by Chris Hansen, has gained 36% year-to-date through the end of March, The Wall Street Journal's Juliet Chung reported Thursday.
• Meanwhile, markets were roiled by the coronavirus pandemic. The Dow Jones industrial average shed 23%, and the S&P 500 lost 20%.
• The fund profited on short bets it placed against cruise lines, international airlines, and travel companies, according to the report.
• Read more on Business Insider.

Amid a major market rout spurred by the coronavirus pandemic, one hedge fund has had outsize returns betting against the companies hit hardest.

Valiant Capital Management, led by Chris Hansen, has gained 36% year-to-date through the end of March, before fees, The Wall Street Journal's Juliet Chung reported Thursday, citing people familiar with the firm. Meanwhile, US stocks tanked — the Dow Jones industrial average lost 23%, its worst first quarter ever, and the S&P 500 lost about 20%.

The $1.4 billion fund was able to profit in the wreckage by placing strategic bets against leveraged companies that it saw being hit the hardest by the coronavirus outbreak. The hedge fund shorted stocks of cruise lines, international airlines, and travel companies, according to the report.

The returns are some of the best in the hedge-fund industry this year, according to The Journal. Hedge funds had been hurt by the longest-ever bull market, which ended when the coronavirus pandemic sent stocks tumbling in February.

Read more:A new survey of 159 pro investors shows experts are looking to buy stocks again. Here's what 9 of them had to say about where they're putting money to work.

Valiant also profited on credit-protection bets it made in mid-February as the coronavirus crisis increased the likelihood of corporate defaults, The Journal reported. It closed half of its hedge a month later, according to the report.

The fund also cashed in on put options, or contracts that allow the holder to sell shares at a specific price or date. Valiant had purchased cheap put options against indexes in the US and India and bought additional put hedges starting in late January as concerns about the virus rose, The Journal reported.

The notional values of Valiant's options contracts were between $1 billion and $2 billion at their peaks, according to The Journal. That's roughly the same size as the fund's entire portfolio.

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

• Billionaire hedge-fund manager Bill Ackman made $2.6 billion off a controversial bet that the coronavirus would crash the stock market last month.
• Ackman was accused of making inflammatory remarks during an appearance on CNBC with the intention of moving the markets to increase his profits but denied it in a press release.
• Ackman, worth $1.6 billion, has a history of making controversial bets.
• He has a vast portfolio of luxury real estate and was the subject of an investigation by the New York District Attorney's Office in 2003.
• Visit Business Insider's homepage for more stories.

While most of the world saw their nest eggs decimated as the stock market went into a free-fall over coronavirus fears last month, one hedge-fund manager was raking in billions.

Bill Ackman, the chief executive of Pershing Square Capital, made $2.6 billion for the hedge fund off a $27 million bet that the pandemic would tank the market. Ackman has a history of controversial bets that earned him a $1.6 billion fortune and an investigation by the New York District Attorney's Office, although no charges were ever filed.

A representative of Ackman at Pershing Square Capital declined Business Insider's request for comment on Ackman's career, net worth, property holdings, or family life.

Keep reading to learn more about Bill Ackman.

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William Ackman, 53, was born and raised in a wealthy suburb outside of New York City.

Ackman was raised in Chappaqua, the wealthy New York suburb of north of New York City, according to The Daily Mail. Chappaqua is also home to Bill and Hillary Clinton, Ben Stiller, and Vanessa Williams, according to The Daily Mail.

Ackman's father, Lawrence Ackman, owned a commercial real-estate financing firm, according to The Minneapolis Star Tribune. His mother, Ronnie Posner Ackman, serves on the board of New York's Lincoln Center, according to The New York Times.

Ackman earned an undergraduate degree and MBA from Harvard, according to Forbes. Shortly after graduating in 1992, Ackman founded a successful investment firm with a former classmate called Gotham Partners at age 26, The Minneapolis Star Tribune reported. The firm was successful but Ackman decided to wind it down in 2002, citing a series of lawsuits.

In 2003, Ackman was investigated by the New York State Attorney General over Gotham's trading practices, but no charges were filed.

Gotham wrote and published an overwhelmingly positive article about one of its portfolio companies, Pre-Paid Legal Services, and subsequently sold its stock, according to The Minneapolis Star Tribune. Although no charges were ever filed, Ackman said the highly publicized investigation was difficult on his family.

"People look at you funny," Ackman told The Minneapolis Star Tribune of the incident in 2008. "I learned that it takes a lifetime to build a reputation, and someone can destroy it in a few days."

Ackman went on to found Pershing Square Capital Management with $54 million in 2004.

The money was a combination of funds from his personal fortune and a loan from Leucadia National, according to The Minneapolis Star Tribune. The firm was a near-instant success. In one of its best years, 2014, Perishing Square posted 40% returns compared to the S&P 500's 13% gain the same year, according to Investopedia.

Pershing Square has large stakes in Chipotle Mexican Grill, Starbucks, and Burger King owner Restaurant Brands International Inc., Bloomberg reported. The value of its total assets tops $6.5 billion, according to Forbes.

In a 2014 interview with Bloomberg, Ackman said his rules for investing are to be bold, do the opposite of what everyone else is doing, and do lots of research.

Ackman's hedge fund made most of its money by purchasing stakes in large corporations, lobbying management to make changes to drive up its stock price, and then quickly offloading their shares at a profit, The Minneapolis Star Tribune reported in 2008. For example, Pershing Square bought a large stake in fast-food burger chain The Wendy's Company in 2004, pressed it to sell off its successful Canadian subsidiary Tim Hortons, and went on to cash out its investment at a profit, according to Investopedia.

"His game is to drive up the stock and get out — fast," Howard Davidowitz, then-chairman of a New York investment banking and consulting firm, told The Minneapolis Star Tribune of Ackman in 2008.

But Ackman is widely considered to be an activist investor, according to Markets Insider.

"What we do for a living, buying stakes in companies and working to make them more valuable, more efficient, more effective, I think it's great for the shareholders, I think it's great for the employees," Ackman told Bloomberg. "I think I can do some good with that, and it's also very profitable. So I like my day job."

Pershing Square's success made Ackman a billionaire. He first appeared on Forbes' billionaire's list in 2013.

Source: Markets Insider

Ackman's bold bets have made Pershing Square a lot of money — but they have also cost the hedge fund billions too.

Ackman's 2012 short against multilevel marketing supplement maker Herbalife was one of the most high-profile missteps of his career, according to Investopedia. Ackman bet $1 billion that the company would fail, while fellow billionaire investor Carl Icahn made a long-term investment in the company, Business Insider previously reported. Ackman publicly accused Herbalife of being a pyramid scheme whose stock price was bound to hit zero, according to The Wall Street Journal.

Icahn and Ackman got into a public fight over the company's prospects that was called "the hedge fund equivalent of Stalingrad" by The Journal, with Icahn eventually emerging victorious. Ackman lost hundreds of millions of dollars on Herbalife, Business Insider reported.

Ackman also made a controversial investment in near-bankrupt drugmaker Valeant Pharmaceuticals that resulted in a contentious Senate hearing over Valeant's practice of buying existing drugs and selling them at inflated prices in 2016, Business Insider reported at the time. Valeant has since been renamed Bausch Health.

Pershing Square also lost money on bets on now-defunct bookseller Border's Group and big-box retailer Target Corporation, according to Investopedia. The losses put the hedge fund into what Bloomberg called a "three-year losing streak" in 2019, before Ackman's bet against the stock market.

Ackman's hedge fund made billions of dollars when coronavirus fears sunk the stock market in March.

The stock market dropped 30% in March, the fastest drop of that size in a century, according to Forbes.

Pershing Square invested $27 million in credit protection on investment-grade and high-yield bond indexes earlier in 2020, when the market was widely perceived to be healthy, according to Markets Insider. The hedge fund made $2.6 billion selling them off as the market crashed in March, Markets Insider reported.

Ackman has since used the profits to bolster Pershing Square's investments in Berkshire Hathaway, Hilton, Lowe's, Restaurant Brands International, Starbucks and Agilent, Markets Insider reported.

Ackman was accused of purposefully sinking the market to boost his profits.

Ackman made an appearance on CNBC on March 18, proclaiming that "hell is coming" because of the outbreak, after tweeting similar sentiments earlier in the day. Ackman's comments sent the already volatile market down, prompting accusations from various news outlets and on social media that Ackman went on television with the intent of making his bet against the market more profitable, Forbes reported.

Markets plunged so sharply that the market hit a so-called circuit breaker, halting trading for 15 minutes, Markets Insider reported.

The billionaire defended himself in a statement to Pershing Square investors, writing that "By Wednesday, March 18th at 12:30 p.m., when I appeared on CNBC, we had already sold slightly more than half of the notional amount of our CDS, realizing a gain of more than $1.3 billion, with the unrealized portion of our hedge having a market value at that time of $1.3 billion for a total of $2.6 billion," Ackman wrote in a press release. "Importantly, our hedge had already paid off prior to my going on CNBC."

Ackman also ruffled feathers by defending a fellow hedge-fund manager who has been linked to Bernie Madoff.

Ezra Merkin secretly invested his client's money with Bernie Madoff, losing billions after the Ponzi scheme was exposed, according to Bloomberg. Merkin was investigated by the New York Attorney General as a potential coconspirator of Madoff's but settled his case in 2012.

"I've known him for 15 years," Ackman said. "I think he's an honest person, an intelligent person, an interesting person, a smart investor. People don't want to hear that because if you invested with Ascot you lost all your money."

Fellow hedge fund manager Michael Steinhardt of Steinhardt, Fine, Berkowitz & Co. also publicly defended Merkin, according to The Street.

Ackman credited his new family for inspiring his profits.

"Maybe it has something to do with being loved and getting married?" Ackman said of his successes at an investor conference in April 2019, Bloomberg reported.

Ackman and his wife, retired Israeli Air Force lieutenant and MIT professor Neri Oxman (who is also known for being a rumored ex-girlfriend of Brad Pitt), welcomed a daughter in the spring of 2019, according to Bloomberg.

The couple got together in 2017, after being introduced by both Ackman's former professor and a college friend following a contentious divorce from his first wife, landscape architect Karen Ann Herskovitz, according to Page Six.

Ackman and Herskovitz have a "civil, but not warm, relationship," an unnamed source told Page Six in 2017. The former couple share three daughters, according to Page Six.

Ackman pledged to give at least half of his fortune to charity.

Ackman signed The Giving Pledge with his former wife in 2012, writing in a letter to Pledge founder Warren Buffett that he was "quite sure that I have earned financial returns from giving money away," because of all he learned while doing charitable work.

Ackman has given more than $400 million in grants to organizations focusing on cancer research, education, economic development, and social justice, according to his foundation's website.

Ackman and his wife also gave $26 million to Harvard in 2014, according to Philanthropy News Digest.

He spent a large chunk of the rest of his money on an expansive portfolio of luxury real estate.

Ackman bought a $22.5 million penthouse in the neighborhood, The Wall Street Journal reported in 2018. Ackman also owns two other units in another luxury pre-war building on Manhattan's Upper West Side that cost nearly $22.1 million combined, The Journal reported.

They also own a six-acre estate in the Hamptons.

Ackman purchased the properties, which are located in the town of Bridgehampton, for $23.5 million in August 2015, according to The Real Deal.

The combined value of Ackman's real-estate portfolio is more than $165 million, according to The Daily Mail.

In his free time, Ackman is an avid tennis player.

Ackman has been playing since childhood, according to Forbes.

Ackman also has an interest in politics.

The billionaire hedge-fund manager became an outspoken supporter of President Trump just days after the 2016 election, according to Vanity Fair. "The US is the greatest business in the world," Ackman said during an appearance at The New York Times' Dealbook conference in November 2016. "It's been undermanaged for a very long period of time. We now have a businessman as president,"Vanity Fair reported Ackman said.

Ackman hasn't always been a supporter of Trump, however. In 2016, Ackman penned an essay in The Financial Times asking Bloomberg LP CEO and former NYC mayor Mike Bloomberg to run for president. "America is burning," Ackman wrote for The FT. "Yet there is hope. The key is finding the right leader. And that leader is Mr. Bloomberg."

• In an op-ed article for The New York Times, the former investment banker William Cohan said Bill Ackman's bet on the coronavirus tanking the stock market "may be the single best trade of all time."
• Ackman, the billionaire hedge-fund investor, turned a relatively modest $27 million position into a prize-winning $2.6 billion in March when the market tanked as the virus spread.
• Ackman explained his thoughts behind the hedge in an episode of the "Knowledge Project" podcast.
• Visit Business Insider's homepage for more stories.

In a New York Times op-ed article published Wednesday, the former investment banker William Cohan said Bill Ackman's hedging decision "may be the single best trade of all time" and lauded his correct bet that until the Federal Reserve and Congress acted, the markets would tank.

Ackman, the billionaire hedge-fund manager, had an intuition that the coronavirus-driven market meltdown would have a greater impact than investors expected. That led him to mint a multibillion-dollar profit in March, turning a $27 million position into a $2.6 billion windfall through defensive hedge bets as the coronavirus outbreak threatened a deep economic recession.

Ackman's bet that the debt bubble would burst was based on a hunch that investors would cast aside riskier securities in bond indexes as the coronavirus spread across the world.

Read more:'That's where the really big upside is': A CEO overseeing $36 billion pinpoints 7 areas of the market poised to rebound after plummeting as much as 60% this year

In the latest episode of the "Knowledge Project" podcast, Ackman explained his thinking behind the hedge.

"We've got this massive position in a hedge, which maybe has the potential to double if credit spreads widen to where they were during the financial crisis," he said. "But if they don't and the government takes the right steps, this hedge could be worth zero, and the stock market could go right back up to where it was. So we made the decision to exit the hedge."

Ackman also said he started buying stocks with a tidy profit and invested more than $3 billion in risk assets.

Earlier in March, Ackman wrote in a letter to investors that he thought the US "can be reopened carefully as China has so far successfully done" after enforced lockdowns.

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• EMJ Capital — a one-man hedge fund— has gained 56% this year on well-placed technology companies benefiting amid the coronavirus crisis, Bloomberg's Divya Balji reported Wednesday.
• The fund owns shares of Zoom, HelloFresh, and German food delivery app Delivery Hero. All three have boosted his returns this year. 
• Outside of tech, he's also watching healthcare for winners that will emerge from the coronavirus crisis. 
• Read more on Business Insider. 

EMJ Capital, run solely by Eric Jackson, has posted an outsized 56% return this year by betting on tech stocks that've benefited amid the coronavirus pandemic, Bloomberg's Divya Balji reported Wednesday.

One of the biggest bets Jackson made that led to the market-beating performance was doubling down on shares of Zoom, the video conferencing application. Zoom shares have gained about 112% this year through Tuesday's close.  

In early February, Jackson noticed that Zoom downloads had spiked in China as the COVID-19 outbreak shut down major parts of the country. He then doubled his Zoom position, according to the report. 

"They are a verb. You don't see too many verbs in the tech space. When one comes along like Google, you would have been wise to plunk down an investment and stick with it and I think the same is going to be the case for Zoom," he told Bloomberg. 

Jackson's solid year comes during a rough time for most hedge funds. Many were hit with client withdrawals following the March market rout, which sent global hedge fund assets below $3 trillion for the first time in six years, according to the report. 

Read more:A fund manager trouncing 90% of his rivals shared with us 5 trades he's making to stay ahead — including a big bet on Disney after it was crushed in the pandemic sell-off

But Jackson has fared well through the pandemic and has had to make few adjustments as he already worked from home, according to Bloomberg. Another bet that's raised his returns this year is HelloFresh SE, a meal kit company that's blossomed as consumers are asked to stay at home and practice social distancing. HelloFresh has roughly doubled for the year through Tuesday's close.

Jackson also bought into Delivery Hero SE, a German food delivery application, which has gained 16% this year through Tuesday. And he's betting that eBay will make a comeback soon — he bought shares last quarter, according to the report. 

Since the long-short fund's inception in 2017, it's gained about 131% to $61 million in assets at Tuesday's close. The fund usually owns between 11 and 20 stocks, according to Bloomberg, and also uses options as a part of its strategy. 

Jackson thinks that the pandemic will change healthcare and technology, he told Bloomberg. He holds DexCom Inc., a company that makes blood-sugar level monitoring devices for diabetic patients. The company has gained 67% this year through Tuesday.

He also owns shares of Livongo Health, a remote-health monitoring company that's gained 75% this year. 

"If I start to hear the same name come up over and over again, that's usually a good sign that the company is just on the cusp of something great," Jackson told Bloomberg. "So I'm getting behind those companies early, sticking with them, not just sort of selling out quickly."

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• Hedge funds posted an "extreme rotation" out of cyclical stocks after the end of the first quarter as managers brace for a potential market downturn, Bank of America analysts wrote Wednesday.
• Such funds are now the most defensively positioned they've been since the bank began tracking the data in 2011.
• Long-only funds made similar moves to pad against a downturn, dumping nearly 80 million of energy company shares in the second quarter so far following oil's late April plunge.
• Visit the Business Insider homepage for more stories.

As stock indexes rally and investor sentiments improve, hedge funds are battening down the hatches for continued coronavirus turmoil.

Such funds made an "extreme rotation" out of cyclical stocks at the start of the second quarter, Bank of America said in a Wednesday note. Managers are now the most defensively positioned they've been since the bank began tracking the data in 2011.

Hedge funds' concentrations in the health care and utility sectors now sit two standard deviations from their long-term average, the team led by Savita Subramanian wrote. Long-only cyclical versus defensive exposure sank to its lowest point in 12 months, and positions in energy, discretionary, and materials companies neared record lows.

Facebook, Equifax, and Charles Schwab are some of the most heavily weighted hedge fund picks compared to the S&P 500 index, the team said.

Read more:A fund manager trouncing 90% of his rivals shared with us 5 trades he's making to stay ahead — including a big bet on Disney after it was crushed in the pandemic sell-off

The funds' rotation joins a broader move away from the energy sector. Recent weeks saw oil prices dive below zero for the first time ever and drag on a wide range of energy companies. While the commodity has since posted a strong rebound, the connected sector hasn't enjoyed such healthy gains. Funds tracked by Bank of America sold nearly 80 million shares in energy companies since the first quarter ended, according to the note.

Even as funds reduce concentration in cyclical stocks, investor optimism continues to rise amid economic reopenings. Institutional clients' four-week stock market flows turned positive last week after temporarily sliding to zero, Bank of America said, indicating fresh hopes for a market recovery.

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• Chad Glauser, the founder and portfolio manager of Alpine Quantitative Management, uses a combination of just three exchange-traded funds to best express his market views.
• Glauser keeps an incessant focus on volatility and uses the dynamic pricing action between his three ETFs as an indicator for when to dip in and out of allocations.
• He also stays 100% invested at all times.
• Glauser's fund has beaten the return of the S&P 500 Target Risk Conservative Index for 28 straight months.
• Click here for more BI Prime stories.

There's a common perception that quantitative investing needs to be complicated. Chad Glauser disagrees.

"The simplicity of quant is the most important thing to us for it to work it the future," Glauser, the founder and portfolio manager of Alpine Quantitative Management, said in reference to his company's straightforward and systematic navigation of financial markets on "The Contrarian Investor Podcast." 

After Glauser tinkered with different approaches during a five-year incubation period, he zeroed in on what he felt was the best way to express his market views.

Glauser eschews the bells and whistles that go hand in hand with more traditional quantitative approaches. His entire strategy boils down to just three ETFs — SPDR S&P 500 ETF (SPY), iShares 20-plus Year Treasury Bond ETF (TLT), and the iShares 1-3 Year Treasury Bond ETF (SHY). And he pairs that combination with a laser focus on volatility.

But that's not where his unorthodox approach to markets ends.

Glauser stays 100% invested at all times, trades only a handful of times a year, and forgoes the usage of the Cboe Volatility Index — or VIX, which is commonly referred to as the stock market's fear gauge — in favor of a proprietary measure. He referred to this handling of volatility as the fund's "secret sauce" and said it was derived by monitoring dynamic price movements between his three ETFs.

"Using volatility as our indicator, it allows us to get out of the way of trouble," he said. He added that his firm back tested 30 years and even looked at 1929 and found if investors used volatility as their indicator, they "could've got out of the way of the worst situations that have existed financially in the world."

Glauser's less-is-more approach seems to be paying off. According to a recent press release, since 2017 he's beaten the S&P 500 Target Risk Conservative Index. That's 28 straight months of outperformance.

Navigating today's market

Normally, the fund's trades are executed monthly in a systematic fashion. However, that notion can change quickly when the system recommends a more conservative approach.

In January, Glauser's model provided an early signal that trouble was brewing. It suggested the fund increase its allocation to short-term Treasurys through the iShares Barclays 1-3 Year Treasury Bond Fund.

"That's when the first discussions in our office happened about: 'Hey, let's pay attention to what's going on here,'" he said. "The first 10 days of February, our system said trade it three times. That's when we said: 'OK, let's take a real deep dive into what's going on — let's take a look at what's going on. And we realized then that the market was exhibiting similar behavior as 2008, 2009, 2010 as it was now but obviously for different reasons. " 

The early warning signs that Glauser's model provided proved clairvoyant as the market precipitously plunged into bear-market territory in just 20 days. In total, from peak to trough, the S&P 500 shed over 30% in about one month.

"For us, if you're not responding to the information and actively, it's kind of shame on you," he said. "And responding, obviously, correctly is most important." 

Today, Glauser thinks the overall market environment is risky, but he's starting to buy at depressed levels. He describes his view as "cautious confidence."

"I think a lot of the negative effects of COVID have yet to truly show itself in the market, so I think now more than ever it's time to take care with your money and realize that we're all in a vulnerable situation," he said. "April, for the first time, we're going back out into the market and starting to buy on long-term Treasury and on SPDR."

SEE ALSO: Fund manager David Samra has handily beaten the market over nearly 2 decades. He shares 4 simple criteria he looks for in each investment — and details 4 'obvious' places investors should be rushing towards today.

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• As the coronavirus pandemic spread across the globe, the stock market plunged more than 30%.
• While most investors suffered from the drop, one hedge fund provided its clients with returns in excess of 4,000%. 
• The "Black Swan" fund, managed by a protege of Nassim Taleb, invested in securities and derivatives that benefited from the extreme market volatility caused by the coronavirus.
• Taleb is the author of 2007's "The Black Swan: The Impact of the Highly Improbable"— a book that has had a lasting impact on investors and was released just before the start of the great financial crisis.
• Here are 10 of Taleb's most thought provoking quotes.
• Visit Business Insider's homepage for more stories.

Nassim Taleb was back in the news in April as one of his proteges posted a remarkable return for his hedge fund last quarter.

Mark Spitznagel of Universa Investments posted a 4,144% return as the fund profited from the heightened market volatility caused by the coronavirus pandemic.

Spitznagel was a student of Taleb at New York University and together they established Empirica Capital in 1999. Additionally, Taleb serves as an adviser to Universa Investments.

The pair have specialized in tail-risk investment strategies that can post substantial returns during periods of market stress.

Read more: Morgan Stanley handpicks the 18 best US stocks to buy now while they're cheap to enjoy profits for years to come

Taleb is the author of 2007's "The Black Swan: The Impact of the Highly Improbable"— a book that has had a lasting impact on investors and was released just before the start of the great financial crisis.

The book details the extreme impact of rare and unpredictable outlier events, and the human tendency to find simple explanations for these events, after the fact.

Here are 10 of the most thought-provoking quotes from Taleb.

'Wind extinguishes a candle, but energizes a fire.'

Source: Antifragile: Things That Gain From Disorder

'You need a story to displace a story.'

Source: The Black Swan: The Impact of the Highly Improbable

'Courage is the only virtue you cannot fake.'

Source: Skin in the Game: The Hidden Asymmetries in Daily Life

'The difference between successful people and really successful people is that really successful people say no to almost everything.'

Source: Skin in the Game: The Hidden Asymmetries in Daily Life

'Those who talk should do and only those who do should talk.'

Source: Skin in the Game: The Hidden Asymmetries in Daily Life

'A mistake is not something to be determined after the fact, but in light of the information available until that point.'

Source: Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

'More data—such as paying attention to the eye colors of the people around when crossing the street—can make you miss the big truck.'

Source: Antifragile: Things That Gain From Disorder

'Difficulty is what wakes up the genius.'

Source: Antifragile: Things That Gain from Disorder 

'A prophet is not someone with special visions, just someone blind to most of what others see.'

Source: The Bed of Procrustes: Philosophical and Practical Aphorisms

'It is my great hope someday, to see science and decision makers rediscover what the ancients have always known. Namely that our highest currency is respect.'

Source: The Black Swan: The Impact of the Highly Improbable