The British investment fund managed by Pelham Capital has lost hundreds of millions of dollars due to its investments in US stocks, Bloomberg said.
The investment banking company posted a record-breaking monthly loss in January 2022, thus notching its worst performance in the last 14 years.
Data showed that the company’s flagship Pelham Long/Short Fund tumbled by 18.5% in January. Last year, its equities sank by 12%. As of the end of 2020, the value of the fund’s assets was estimated at $5 billion. Thus, the firm has incurred significant losses by the beginning of this year. Moreover, the Pelham Long/Short Fund has been reporting declines for several months in a row.
This is mainly due to ineffective investments in the shares of US companies. Pelham Capital, which specializes in long/short investing, has about 50% of its long positions and 24% of its short positions in US stocks. However, such a strategy runs counter to the traditional investment approach of the fund, whose management prefers to invest in European enterprises.
According to analysts, Pelham Long/Short Fund fell into the same trap as other funds, though they got off lightly. In the first month of 2022, these firms faced a massive sell-off in growth stocks. This panic selling was caused by expectations of upcoming interest rate hikes by the Fed. Notably, when the regulator raises interest rates, bonds and other debt instruments become more attractive to investors.
