The money-management industry has a diversity problem.

A global study from Morningstar last year showed that only one in five mutual-fund managers is a woman – a rate that hasn't budged since 2008.

In the US, that number drops to one in 10. The US is a laggard, far behind countries such as Singapore (30%), Portugal (28%), and France (21%).

For hedge funds, the numbers are similar: Only 15% of hedge fund CEOs are women. For minorities, the figures are just as lackluster, with only a handful of Latino and African-American managers.

There are a lot of reasons for the gap, among them biases, cliquey hiring, and weaker professional networks for women.

Given the dire numbers, I wondered what it's like to be a woman, minority — or both — working in the industry. So in late 2016, I started asking around.

In light of the Harvey Weinstein scandal that hit Hollywood this week, Business Insider is republishing the article on their personal stories, which described first-hand accounts from women in the hedge fund industry about their experiences climbing up the ranks.

Some women recounted casual sexism, like being asked to pour the coffee. Others spoke of not having their investment ideas valued fully until a man pitched them. And in one account, a man who worked on a trading desk recounted how colleagues refused to consider hiring women in the first place.

To be clear, no one we spoke to alleged any instances of sexual harassment. And most said their experiences had, on the whole, been otherwise positive. Investing proves a quantifiable measure on which to be measured, something other careers lack, several people mentioned. There are fewer gray areas on which to be measured, the thinking goes, if you can point to a number that proves your performance for the year.

Everyone asked to be kept anonymous so to not jeopardize their careers. Here are their stories.

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"They would crumble up a girl's résumé. They'd say, 'We don't hire girls because they cry'"— A black male fund manager who started out working on an exchange

"African-American traders, except for the lowest positions of clerks, were underrepresented. It was a very racist and prejudiced place. But I experienced only a slightly higher level than I'd experience naturally. What I did observe, when you're experiencing some form of discrimination, you are unaware of it, but what I was acutely aware of was the anti-woman perspective ... They would crumble up a girl's résumé. They'd say, 'We don't hire girls because they cry.' On the floor, it's a very sort of almost military barking back-and-forth that goes on. It's not an Oprah Winfrey show ... On top of that, they said girls are a distraction."

"[There was] this dismissive attitude that because there aren't women here, then they aren't good. The reason they are not here is because they're not good at trading — that’s one lesser degree of it. [There was also an attitude of,] 'You fire them and then they sue you for sexual harassment.'"

"I was subject to racial slurs, the jokes, the inappropriate stuff, which you just deal with and you’ve dealt with your whole life … The floor is just a crass place ... People would stop me and say, 'Why are these n-----s doing such and such?' There'd be something in the news, a protest or something, racial tension. The worst thing for me was being in a position where I have to stand by a principle or duck and win by success."

"I was so arrogant and felt like I was going to make it that it didn't bother me that much. And because you don't see the job you don't get, the job offer you didn't get, you're not as upset. The girl's résumé that got crumpled up on the floor and got one thousand no's, she didn't hear, 'You're a girl and you're going to cry and that's why we didn't hire you.' So she's not p----- off."

"He was surprised I wasn't pitching a more 'girly' name"— Female hedge fund analyst

"It has always been a more uncomfortable game of numbers where the ratio of male to females in any event is 10 to one and the men huddle together and the women are sort of separated. In one instance, I was meeting with an analyst from a hedge fund in the city and he asked whether I had any names I could pitch him. I began to talk about a semiconductor company when he interrupted to say he was surprised I wasn't pitching a more 'girly' name." 

"We were the only two women, and we were the ones that were expected to fetch and then make the coffee"— Female hedge fund founder

"The CEO of one of our consumer companies asked me to get him coffee. This was after we were introduced and he knew there was an associate (I was an analyst) who ranked lower, but he was male so he turned to me to get him the coffee. I said, 'sure' and had the associate search some out. Absurd! Even worse, when the assistant brought in the coffee he pushed it to his investor-relations person, and she was forced to make his coffee by adding milk and sugar, mix it, and then pass it back to him. She wasn't an assistant and was a professional in her own right. So in this decent-sized meeting, we were the only two women, and we were the ones that were expected to fetch and then make the coffee respectively."

Investors just can't resist making a quick buck on the motionless stock market.

With price swings already locked near record lows for weeks, traders have pushed short bets on the CBOE Volatility Index (VIX) — widely known as the S&P 500 fear gauge — to a new record.

It marks the fourth such record in just 11 weeks for hedge funds and large speculators, which have made a serious habit out of betting against the VIX, according to data compiled by the US Commodity Futures Trading Commission.

And the beneficiaries go much further than the hedge fund world. In late August, it was revealed that a former Target manager had made millions of dollars shorting the VIX. It's likely that his stay-at-home success emboldened other retail investors, armed only with their online brokerage accounts, to do the same.

That hedge funds have remained so willing to keep piling into short-VIX bets betrays an old adage of investing: once the average retail investor catches wind of a trade, the gig is up. Instead, large investors have continued to double down, even amid a growing chorus of experts calling for discretion.

Perhaps the most outspoken critic of the trade has been Marko Kolanovic, the global head of quantitative and derivatives strategy at JPMorgan. He said in late July that strategies suppressing price swings reminded him of the conditions leading up to the 1987 stock market crash. He's since doubled down on the warning on multiple occasions.

More recently, Societe Generale head of global asset allocation Alain Bokobza compared the continued VIX shorting by hedge funds to "dancing on the rim of a volcano." He warned that a "sudden eruption" of volatility could leave traders "badly burned." The comments echoed those made by Bokobza a couple weeks prior, when he maligned the "dangerous volatility regimes" in the global marketplace.

Even one of the foremost pioneers of modern volatility, Hebrew University of Jerusalem professor emeritus Dan Galai, has gotten in on the criticism. In a recent interview with Business Insider, Galai compared the capital being used to short the VIX as "stupid hot money," and likened the trade to "a substitute for going to Vegas and betting on the roulette."

Apparently none of these warnings have registered with hedge funds. And if they have, those large speculators appear content to ignore them as they seek returns in a market otherwise largely devoid of opportunity.

It remains to be seen whether the whole situation will implode, but for the meantime, they're content to keep chasing the low-hanging fruit.

SEE ALSO: A flawed argument used by Warren Buffett could be setting stocks up for 'one of the worst disasters in history'

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• Report from VC Mangrove Capital says average return across 204 initial coin offerings is 1,320%.
• Figure comes amid growing interest from hedge funds and investment banks in the cryptocurrency space, with over 55 crypto-specific hedge funds.

LONDON — A blind investment in every initial coin offering (ICO) to date, including those that have failed, would have generated an average return of 1,320% for investors, according to a new report.

Venture capital firm Mangrove Capital Partners claims that: "If one had blindly invested €10,000 in every ICO, including the significant number of ICOs that failed, this would have delivered a +13.2x return."

Michael Jackson, the former COO of Skype and a partner at Mangrove, authored the report and looked at data on 204 ICOs with "known outcomes"— ones where tokens are now being actively traded on exchanges or have failed since issue.

Jackson's findings highlight why many institutional investors — from hedge funds to investment banks — are now waking up to the cryptocurrency space.

ICOs explained

ICOs are a new way of funding startups by issuing digital tokens that can be traded online. The tokens are inspired by, and structured like, earlier cryptocurrencies Bitcoin and Ethereum, whose network is in fact used to launch most ICOs. These new digital currencies and sold for real money, which is used to fund the development of the startups.

The tokens or coins are usually linked to the startup in some way. Mangrove uses this analogy to describe the process:

"A music streaming service could sell subscription tokens in bulk ahead of launch and amass a customer base motivated to promote the service as soon as the product is functional, not least because the value of their tokens will rise."

ICOs have boomed in popularity in 2017, with over $2 billion raised since the start of the year. For companies looking at applications of blockchain technology, ICOs have far outstripped venture capital as the biggest source of funding.However, regulators around the world have warned that ICO investments are high risk and unproven. While some coins have exploded in value, the market is characterised by huge volatility. UBS recently said the space is in a "speculative boom."

Despite these uncertainties, many investment banks and hedge funds are starting to express an interest in investing in ICOs and cryptocurrencies.

'Hedge funds and mutual funds are assessing the crypto opportunity'

Etienne Brunet, a London-based venture capitalist who has studied the ICO market, told Business Insider: "Over the last year or so you have had crazy returns in the crypto space.

"It took institutional investors a long time to go from ‘what is this' to 'maybe we should invest,'" he said. "First, VCs were the ones interested in investing in an ICO. Now, institutional investors ranging from hedge funds and mutual funds are quickly pushing the effort to assess the crypto opportunity."

Hedge funds and other active investors have struggled in the post-financial crisis era amid the rise of exchange-traded funds and other passive investment schemes. Hedge funds have typically underperformed simple tracker funds in the decade since the crash.

The appeal of crypto for active investors is that they offer the promise of "alpha"— returns above market averages. Brunet, an investment executive at fund Illuminate Financial, said: "We have hedge funds that have a mandate that's a bit more open than others, and they are starting to buy coins.

"If you allocate one or two people, it's not a great expense but it can drive some alpha. And that, at the end of the day, is what they're looking for."

Autonomous NEXT, a fintech analytics firm, said in August that there were at least 55 cryptocurrency hedge funds it was aware of. Since then, Mike Novogratz, a former manager at Fortress, has announced plans to set up a $500 million for a new cryptocurrency hedge fund and San Francisco's Blockchain Capital on Wednesday announced plans to raise $150 million, part of which will go towards cryptocurrencies.

Goldman's stamp of approval

Reports emerged recently that Goldman Sachs is looking at setting up a Bitcoin trading desk. It follows a note sent to clients in August saying: "It’s getting harder for institutional investors to ignore cryptocurrencies."

Brunet describes Goldman Sachs reported interest in bitcoin as "a major milestone."

"If you are a big fund you can't just go through an exchange because the required quantity is just too large and the liquidity of the exchanges are not as high as traditional equity exchanges like Nasdaq," he said. "Institutional investors need an OTC broker to buy and sell the desired quantities of crypto."

Goldman could fulfil this role. However, there are other regulatory and market infrastructures issues, such as post-trade custody and execution, Brunet says. The regulatory position of many crypto tokens is also unclear.

Still, Mangrove's Jackson wrote in his report: "Once regulated, ICOs could fundamentally change how businesses source growth capital and profoundly impact the venture capital and investment banking communities."

Brunet said: "People think Bitcoin and Ethereum are a new asset class. For the other coins, it's still very much speculative."

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• Samantha Greenberg, a former partner at Paulson & Co. who started hedge fund Margate Capital last year, pitched Madison Square Group at the Robin Hood Conference on Thursday.
• Greenberg said MSG has a 38% upside, and could trade up to $291 a share. 
• Greenberg touted the growing number of billionaires – who may in turn buy more sports teams – as a bullish sign for MSG.

The founder of a fresh hedge fund launch pitched the Madison Square Garden Company to a high-profile Wall Street investor conference on Thursday.

Samantha Greenberg, founder of $200 million Margate Capital and a former partner at Paulson & Co., pitched the sports and events company at the Robin Hood Investors Conference in New York, according to people familiar with the matter. The stock popped in late trading, jumping from around $212.58 just before the presentation to a closing price of $214.83.

The stock could jump to $291, an upside of close to 40%, Greenberg said in her presentation.

Madison Square Garden owns a slew of iconic assets – such as sports teams New York Knicks and the New York Rangers, the Manhattan-based arena Madison Square Garden and the Rockettes. Still, the stock trades at a 43% discount to its fair market value and to competitors, Greenberg said.

The Robin Hood event was set to host some of Wall Street's most well-known investors, including Third Point's Dan Loeb, Baupost's Seth Klarman, Saba Capital's Boaz Weinstein, JP Morgan's Mary Erdoes, JANA's Barry Rosenstein, and Lone Pine's Stephen Mandel.

Greenberg previously was a partner at Paulson & Co. and is one of the few women running a hedge fund. Margate, which focuses on tech, media and telecommunications stock investments, has touted Madison Square Garden in earlier client letters seen by Business Insider. 

The number of billionaires is growing, fueling demand for sports teams

Greenberg's thesis on MSG cited several factors, including a likely growth in the value of sports teams, which are in fixed supply, fueled by a growing number of billionaires, the most likely buyers of teams.

The number of billionaires has grown at a 10% CAGR since 2010, she said, citing a Forbes estimate.

Billionaires like buying teams because they get attractive tax benefits – the majority of the purchase price can be written off against an owner's total income, she said.

Also, as viewership of the NBA grows internationally, foreign investors are also showing interest in buying teams, she said. The NBA got its first Chinese owner last year, for instance, when  Lizhang Chiang bought a stake in the Minnesota Timberwolves.

The valuations of US sports teams have grown at an average 20% annual growth rate for the past five years meanwhile, Greenberg said in her presentation.

She also cited a growing demand for live sports content. Last year, 93 of the top 100 most-watched shows on television were live sporting events, while live sporting events, which make up 2% of TV programming,  represented half of all TV conversations on Twitter, she said.

The stock could jump based on several catalysts, the most obvious being a buyout of MSG by Dolan family, which owns 22% of MSG and controls 70% of the company's voting power, she added.

Separating MSG's entertainment assets from its teams would be the most logical value-unlocking catalyst, meanwhile, she said.

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• Dan Loeb's Offshore and Ultra funds hold respective gains of 14.5% and 23% this year.
• The average hedge fund was up 5.92% through September 2017.

Third Point LLC, the hedge fund founded by billionaire investor Daniel Loeb, continues to post impressive returns when compared to its peers. 

In a letter to clients Friday, following the end of the third quarter, the fund reported year-to-date returns of 14.5% for its Offshore Fund and 23.0% for its Ultra fund.

The average fund was up 5.92% through September 2017, according to Hedge Fund Research. 

"Deregulation is occurring quickly and although tax reform remains in the works, we expect that markets will continue to move higher, driven by strong consumer and business confidence combined with synchronized global growth," the hedge fund said.

"The strength in global growth is largely owed to the worldwide easing of financial conditions that started during the first quarter of 2016, catalyzed by the weakening of the US Dollar and the Fed’s failure to execute on its forecasted four interest rate hikes last year."

Congress took a first step to finally legislating tax reforms on Thursday, when the Senate passed a budget resolution containing Reconciliation, which would allow Republicans to pass a tax bill through the chamber with only a simple majority.

Third Point also invested in Illinois-based Dover Corporation, a $15 billion industrial conglomerate. Loeb said the fund can increase shareholder value by addressing underperforming segments of Dover’s business and optimizing capital allocation.

"Mapping out the course to year-end, we see more of the same conditions. While we invest a lot of time and effort in the analysis of policymaking, it doesn’t appear for now that any of the incremental changes under consideration in tax cuts or rates – whether or not they come to pass – will materially impact the markets," Third Point said. "We expect the Fed to continue to raise rates but changes to FOMC leadership will determine the pacing."

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• Billionaire hedge fund manager Bill Ackman has been locked in a proxy battle with activist target ADP for months.
• ADP CEO Carlos Rodriguez hasn't hesitate to call out Ackman publicly about his attempts to use the media to sway the activist proceeding.

The ongoing battle between hedge fund billionaire Bill Ackman and his latest activist target just keeps getting more heated.

The latest development came over the weekend, when the CEO of ADP— the payroll and benefit provider that's drawn unwelcome interest from Ackman — shared some comments with Lindsay Fortado of the Financial Times.

Carlos Rodriguez told the FT that the second time he spoke with Ackman, thePershing Square Capital Management CEO warned him that if ADP didn't comply with his activist wishes, then he'd conduct a public campaign against the company — one he was well-positioned to win.

"He said: I know you don’t like the media, but I do and I’m really good at it," Rodriguez told the FT. "And if this gets into a public battle, it’s going to be bad for you personally, it’s going to be bad for the company, but I’m fine with it because — and he said this — I’m told that I’m only second to Donald Trump in terms of number of clicks on the internet, and hence you will lose if there’s a public relations battle."

The pointed comments were just the latest entry in the ongoing saga between Ackman and the New Jersey-based company, which have been grappling for weeks over the activist investor's quest for board seats. ADP rejected Ackman's nominees back in August.

Ackman had been seeking three spots on ADP's board as part of a "transformation plan" that he thinks coulddouble the company's stock price, according to comments made on a conference call earlier this year.

Rodriguez's comments to the FT don't mark the first time ADP has publicly aired out Ackman's attempts to use the media to his advantage. In a late-August regulatory filing, the company accused Ackman of threatening to use his ability to generate media coverage to "damage" the company.

Further, earlier in the ordeal, following Ackman's attempt to get an extension for his submission of potential board replacements, Rodriguez even went as far as to say in a CNBC interview that the billionaire hedge funder's behavior reminded him of a "spoiled brat" asking a teacher for an extension on homework.

Throughout the war of words, Ackman has disputed Mr Rodriguez’s recollection of their conversations, saying publicly that he's willing to work with him.

“It’s disappointing that ADP continues to attack the messenger instead of addressing the important questions we have raised about ADP’s operational underperformance and its deteriorating competitive position,” Ackman told the FT.

If the past few months are any indication, this escalating situation is far from over. Stay tuned for updates.

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• Baupost's Seth Klarman, one of Wall Street's most respected investors, says investors are asking "Why sell?" when really they should be asking "How can I afford not to?"
• He made the comments in a private letter to clients as the stock market continues to rage on to historic highs.
• Baupost is holding roughly 40% of its assets in cash and is returning $2 billion to investors at year end, according to a person familiar with the firm.
• The firm's funds made almost no money in the third quarter of this year, but are up about 3% on the year, according to the person familiar with the matter.
• The firm took a 12% loss on Qualcomm, a multinational semiconductor and telecommunications equipment company. 

Seth Klarman, one of Wall Street's most revered investors and founder of Baupost Group, says investors are asking the wrong question about the raging bull market.

As the stock market continues to hit historic highs, Klarman, in a letter to clients, wrote that investors are ignoring big risks. Volatility remains subdued while stock valuations are pricey. And growth stocks – those that represent high quality companies – are appreciating far ahead of value shares, which tend to trade lower than merited.

Klarman runs Boston-based Baupost Group, one of the world's largest hedge funds with $31 billion, which made nearly no money in the past quarter, per the letter. The firm is up about 3% after fees this year through September 30, according to a person familiar with the numbers.

Klarman's analysis boils down to this: Investors are often asking "Why sell? What would I do with the money?" when really they should be asking, "How can I afford not to sell with the risks I'm taking on?"

Here's how Klarman broke it down in the private letter, a copy of which was reviewed by Business Insider:

"First-level thinking says that a 4% bond is better than a 2% bond, which everyone can see. Second-level thinking is that 4% may be insufficient return for the risk," he said. "The other facet of this thinking is the presupposition that the only relevant opportunity set is the current one."

In other words, those who are tied in to middling investments today might find themselves incapable of taking advantage of more attractive opportunities tomorrow. Klarman didn't specify his cash holdings in the letter, but a person familiar with the firm said Baupost holds about 40% of its assets in cash.

Baupost plans to return a hefty chunk of capital to investors by year's end, meanwhile – about 6% of investors' capital balance as of September 30, 2017 – which is equal to about $2 billion, according to the person familiar with the firm.

Institutional Investor earlier reported about Baupost's letter.

A flat third quarter, and challenges for stock pickers

The firm's funds – which take positions in stocks, private equity and real estate – made almost no money in the third quarter of this year, meanwhile.

Klarman said the firm sold its position in Qualcomm, taking a loss of about 12%, after legal challenges facing Qualcomm's intellectual property proved more difficult to navigate than expected.

Klarman hinted at the challenges active investment managers face. "In a roaring bull market, whatever edges talented investors normally posses are whittled thin. Sellers become scarce, dislocation infrequent, and the rising tide lifts all boats," he wrote.

A change of fortune could be swift, however.

"When the market reverses," he wrote, "dormant advantages conferred by analytical edge, discipline, thoughtful hedging, a sourcing network, team building and process improvement are restored."

Klarman says his firm focuses on the long term and that even good investment picks have proven not always to pan out in the short run.

Klarman and his Baupost colleagues are no strangers to warning about the market's risks.

In client letters earlier this year, which were reviewed by Business Insider at the time, Klarman wrote that investors' perceptions of risk were unreasonably muted. He also laid out worries in a separate investor letter, raising red flags about Trump's proposed tax cuts, for instance, which could considerably raise the government's deficit. 

Meanwhile, Klarman's colleague, Jim Mooney, wrote that high levels of leverage, or borrowings, and low volatility could bring about the next financial crisis.

Baupost managed $31.1 billion as of mid-year 2017, according to the Absolute Return Billion Dollar Club ranking.

SEE ALSO: $18 billion fund manager started by Al Gore and a Goldman Sachs exec sets sights on Silicon Valley

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• Greenlight Capital, the firm founded by the renowned hedge fund manager David Einhorn, told investors that the market seemed to have adopted a new way to value companies, one based on their ability to disrupt competition.
• He addressed recent performance at Greenlight and the "bubble shorts" Amazon, Tesla, and Netflix, saying time would tell whether the "joke is on us."

Greenlight Capital, a $7 billion hedge fund founded by David Einhorn, told clients that the market may have adopted an "alternative paradigm" for calculating the value of stocks.

That's according to a third-quarter client letter sent to investors Tuesday and reviewed by Business Insider.

Here's an excerpt from the letter (emphasis ours):

"The market remains very challenging for value investing strategies, as growth stocks have continued to outperform value stocks. The persistence of this dynamic leads to questions regarding whether value investing is a viable strategy. The knee-jerk instinct is to respond that when a proven strategy is so exceedingly out of favor that its viability is questioned, the cycle must be about to turn around. Unfortunately, we lack such clarity. After years of running into the wind, we are left with no sense stronger than, 'it will turn when it turns.'

...

"Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value. What if equity value has nothing to do with current or future profits and instead is derived from a company's ability to be disruptive, to provide social change, or to advance new beneficial technologies, even when doing so results in current and future economic loss? It's clear that a number of companies provide products and services to customers that come with a subsidy from equity holders. And yet, on a mark-to-market basis, the equity holders are doing just fine."

Greenlight's funds gained 6.2% after fees in the third quarter, bringing its year-to-date return to 3.3%, the letter said.

The letter addressed the recent stock performance of Amazon, Tesla, and Netflix, a group of stocks Greenlight called its "bubble" shorts. The letter said Amazon's and Tesla's stock should have dropped much more than it did in the quarter, given the companies' financial results.

"When we consider the business performance of our three most well-known 'bubble' shorts, we wonder if this alternative paradigm is in play," the letter said.

It said:

• Amazon:"Our view is that just be cause AMZN can disrupt somebody else's profit stream, it doesn't mean that AMZN earns that profit stream. For the moment, the market doesn't agree. Perhaps, simply being disruptive is enough."
• Tesla:"Tesla (TSLA) had an awful quarter both in its current results and future prospects. In response, its shares fell almost 6%. We believe it deserved much worse."
• Netflix: "On the second quarter conference call, the CEO stated, 'In some senses the negative free cash flow will be an indicator of enormous success.' To us, all it indicates is that NFLX is capable of dramatically changing the economics of stand-up comedy in favor of the comedians."

Greenlight also exited a short of Best Buy with a loss. The firm said it "believed the TV and gaming cycle weakness would hurt results," but instead Best Buy benefited from some of its best sales in years because of strength in the Nintendo Switch and high-end computing.

The letter closed with a quote from a song by Tom Petty and the Heartbreakers: "You can stand me up at the gates of hell. But I won't back down."

The firm managed $7 billion in hedge fund assets as of mid-year 2017, according to the Absolute Return Billion Dollar Club ranking.

A spokesman for Greenlight didn't immediately respond to a request for comment.

SEE ALSO: BAUPOST'S KLARMAN: Investors are asking the wrong question about the stock market

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• David Einhorn's Greenlight Capital told clients that Tesla's stock should be performing much worse than it is.
• Greenlight is short Tesla shares, which means it profits from a decline in the stock price. 
• "Tesla had an awful quarter both in its current results and future prospects," falling 6%, Greenlight wrote in a letter to investors. "We believe it deserved much worse."
• Greenlight threw water on Tesla's driverless car plans, saying "autonomous driving may more likely reflect TSLA’s willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage."

David Einhorn's Greenlight Capital is sticking to its bet that Tesla's stock should be performing much worse than they are. 

"Tesla (TSLA) had an awful quarter both in its current results and future prospects," Greenlight, a $7 billion hedge fund, wrote to clients in an October 24 letter reviewed by Business Insider. "In response, its shares fell almost 6%. We believe it deserved much worse."

The letter, which was signed "Greenlight Capital" rather than by Einhorn himself added: "So much went wrong for TSLA in the quarter that it is hard to only provide a brief summary."

Greenlight is short Tesla, which means it stands to gain as the stock falls. That bet has confounded Einhorn in the past, with the shares gaining almost 70% this year. The stock rose slightly Tuesday.

Here are the issues Greenlight highlighted in its October letter:

• "Poor demand for its legacy vehicles and manufacturing challenges for the new Model 3. Notably, TSLA dramatically reduced its gross margin assumption for the September quarter and publicly blamed ramp-up costs for the new Model 3 sedan."
• "More quietly, the company used the lower gross margin hurdle to offer incentives and to lower the cost of options on the Model S and Model X vehicles, and even offered significant markdowns on showroom models. Given the depth of the price cuts, we were surprised that demand for the Model S and Model X only improved modestly."

Greenlight also took issue with Musk's leadership. "While the CEO makes bold claims about TSLA’s superior prowess, continued production shortfalls, defects and product recalls disprove him," Greenlight wrote.

Specifically, Greenlight said that Tesla faces competition from established auto companies that "have decades of scale manufacturing experience."

Greenlight also threw water on Tesla's driverless car plans, writing: "Some of TSLA’s presumed market lead in areas like autonomous driving may more likely reflect TSLA’s willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage."

Tesla's representatives weren't immediately available to comment on Greenlight's comments. Musk has said that he takes safety seriously, and told staffers in a memo earlier this year that he wanted factory injuries reported to him directly.

Musk has publicly responded to short-sellers before, using Twitter. "These guys want us to die so bad they can taste it," he tweeted in June. He's also said he thinks the company's stock price is high based on past and current performance, but low if you believe in the company's future.

Greenlight's funds gained 6.2% after fees in the third quarter, bringing its year-to-date return to 3.3%, the letter said.

The firm managed $7 billion in hedge fund assets as of mid-year 2017, according to the Absolute Return Billion Dollar Club ranking.

You can read more about Greenlight's letter here.

SEE ALSO: BAUPOST'S KLARMAN: Investors are asking the wrong question about the stock market

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• Odey Asset Management's assets under management fell from $11.7 billion at the start of 2015 to $5.5 billion.
• Decline due to bearish bets on a financial crisis not paying off and client redemptions.

LONDON — One of the City of London's best-known hedge funds has seen its assets under management halve since 2015 due to bad bets and client outflows.

The Financial Times reported that Odey Asset Management's assets under management fell from $11.7 billion at the start of 2015 to $6 billion at the end of August, according to a client letter seen by the paper.

In fact, things appear even worse — Odey Asset Management's website states that assets under management are $5.5 billion as of 29 September 2017. The decline has been driven by a combination of poor performance and redemptions from clients.

Odey Asset Management was founded by Crispin Odey, an investor famed for his successful trading of the financial crisis. The firm's OEI Mac fund delivered 43.4% in 2008 as shorts against banks paid off.

Odey Asset Management did not immediately respond to Business Insider's request for comment.

However, the FT said Odey's recent performance has been hampered by similarly bearish bets. The hedge fund manager believes the world is heading for another crash, driven by loose monetary policy and Chinese debt, but his bets against bonds and assets inflated by recent loose monetary policy have so far failed to pay off.

Business Insider reported last year that Odey's flagship fund halved in value in 2016, its worst year on record, and the FT reported that the fund has slid a further 15% in the year to August. It means gains stretching back to 2007 have been wiped out.

Odey was a prominent supporter of the campaign to leave the European Union in last year's referendum. He was one of the founders of the "Vote Leave" group, which became the official Brexit campaign, and is donated just over £500,000 to the cause.

A fund manager at Odey Asset Management reportedly made £110 million betting against the pound in the immediate aftermath of the Brexit vote but Odey himself has been bearish on the vote's economic effects, warning clients last year of likely recession in Britain and a collapse in stock values.

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• Elliott Management, the $34 billion investment firm led by Paul Singer, is barely beating its competition this year, according to a client update reviewed by Business Insider and industry indices.
• Elliott deploys multiple investment strategies, ranging from real estate and private equity to distressed restructuring and activism.

Billionaire Paul Singer's Elliott Management, one of Wall Street's most feared activist investors and one of the largest hedge funds around, is barely beating its competition this year.

The Elliott Associates LP fund is up 6.8% after fees and the Elliott International Limited fund is up 6% after fees this year through the third quarter, according to a September 30 client update that was reviewed by Business Insider.

That's compared to the average event-driven hedge fund, which gained 5.9% over the same period, according to data tracker HFR.

Elliott deploys multiple investment strategies, ranging from real estate and private equity to distressed restructuring and activism. Tenacious, litigious and cut-throat are terms often used to describe the iconic firm, which has been involved in some of the biggest plays in recent memory– from the Argentine debt crisis to more recently, Arconic.

The $34 billion firm doesn't benchmark itself to any index, according to client notes previously reviewed by Business Insider. Nonetheless, we can get a sense of how other hedge funds deploying similar strategies have performed this year by looking at industry indices. Here's a roundup from HFR for performance this year through September 30:

• Event Driven Activist Index: 4.8%
• Event Driven Distressed Restructuring: 4.4%
• Event Driven Multistrategy: 5.4%

To be sure, Elliott has one of the better, and longest running, track records in the industry. The Elliott Associates fund, which launched in February 1977, has posted annualized gains of 13.4%, after fees.

The bulk of Elliott's gains this year have come from its equity oriented strategy (+4.1% gain before fees) and distressed debt (+3.6% before fees), according to the client update.

The firm managed $34.2 billion as of the end of the third quarter – a billion more than it did at mid-year, according to the Absolute Return Billion Dollar Club ranking.

A spokesman for Elliott declined to comment.

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• Billionaire investor David Einhorn thinks he's pointed out the salient characteristics of some of the frothiest stocks in today's market.
• Those are the stocks that can show you the narrative of this bubble — the story we've told ourselves that's worth more than actual money.
• Maybe it's time to give that story a name.

David Einhorn, the founder of hedge fund Greenlight Capital, has started one of the most important conversations we can have during any stock market bubble.

It is not "When will it burst?" Nobody can answer that. The question is "What is it called?"

Bubbles are mostly characterized, after the fact, by their worst excesses. The housing bubble of course was named for excesses in the mortgage market, and the dot-com bubble of the '90s was characterized by the market's obsession with companies with websites, regardless of their profitability. In each case, value was assigned to a security because of a prevailing narrative and not because it was generating cash for its shared owners.

So what will we call this bubble? What is the narrative driving its worst excesses?

Here's how Einhorn is thinking about it, as he wrote in his fund's quarterly letter, sent to investors this week:

"Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value.

"What if equity value has nothing to do with current or future profits and instead is derived from a company's ability to be disruptive, to provide social change, or to advance new beneficial technologies, even when doing so results in current and future economic loss?"

Specifically here, Einhorn was addressing the fact that his basket of "bubble shorts"— which includes market darlings like Amazon, Netflix, and Tesla — is continuing to rise despite a lack of profitability. So the question is, what is the narrative investors are assigning to these companies that somehow means more than money? 

He's telling us what he thinks it looks like and politely suggesting we give this sucker a name.

Some characteristics for your consideration

It almost physically pains me to say it, but Einhorn should call this the disruption bubble.

"Disruption" is overused and uncool, but that's usually true of anything by the time Wall Street gets to it. The idea that "disruption" gets a premium in the stock market goes with the rise of the antiestablishment feeling around us. All the stocks in Einhorn's basket challenge established businesses — businesses so big that they've become institutions.

Current events suggest humans are not so keen on big established institutions right now.

People all over the world have come to distrust legacy institutions in politics and in society, so it's not a stretch to think it's doing the same thing in markets. Additionally, it's reasonable to think we can observe this behavior not just in stocks that are going up, but in stocks that are going down.

I don't mean the obvious shrinking businesses like Macy's that are seeing some of their worst times. I mean the profitable giants that are doing relatively OK and somehow are getting punished for spending money to adapt to the new market. Disney comes to mind.

After Netflix announced that it would burn billions to create content over the next few years and remain cash flow negative (as Einhorn noted in his letter), Wall Street analysts cheered it with a higher stock price.

Around the same time, Disney announced it would invest in its streaming service. In response, Guggenheim analyst Michael Morris downgraded the stock.

"While we are optimistic that the company's proposed direct-to-consumer video products will create long-term value, we expect the initial investment and long lead time into the launch of the Disney-branded offering will weigh on sentiment over the next 12 months,” Morris said.

Oh, so Netflix can burn billions on programs that could be flops (ever heard of "Hemlock Grove"?) and get high-fives all around, and Disney, with decades of content that people around the world are obsessed with, can't invest in a streaming service without getting docked? Guys.

It's probably going to get dumber

I still believe that value is still value. I come from a generation of business writers who cut their teeth during the financial crisis, as bank analyst Meredith Whitney was warning the colossus of Wall Street, "You're either making money or you're not. If you're not making money, get out of the business."

Some of them did (leave certain businesses, that is).

It was a moment when we, as market participants and fearful witnesses, were acutely aware that businesses that do not make money cannot survive. Money was scarce, and so we didn't have time to make up new fun narratives for why money doesn't matter as much as x.

But that moment has passed, as it will in every economic cycle. Now we're in another moment, and in this moment we are buying not just actual destruction — but also the hope of destruction.

Here's another example: Wall Street's newfound love of cryptocurrencies. Nothing says antiestablishment like an attempt to create a currency outside the state and investors are loving cryptos for it. That, of course, doesn't mean we're anywhere near buying McDonald's with bitcoin— or that we ever will be. But we're thinking about it, and in today's world that has finally met the mainstream.

The fact that Lloyd Blankfein is being forced to acknowledge something that's inherently subversive, though, should give you pause. Once legitimized as the establishment, can it still keep its "disrupter" premium?

Wall Street jumping on the bitcoin bandwagon is a little like your mom joining Facebook. Maybe she's awesome, but her participation marked the end of Facebook being young and cool. Bitcoin and other cryptocurrencies, once sanitized and securitized by the beige-ness of banking, will cease to be subversive and interesting as well.

Not to mention that they'll continue to lack any kind guarantee from any legitimate state or even nonstate entity with any power whatsoever. After that subversive, disruptive, destruction premium is gone, that fact remains: You're either making money or you're not, and you either have some power backing your money or you don't.

I can't end this article without acknowledging the following. Yes, low interest rates are pushing money into the stock market and contributing to this bubble (again, if you believe it's a bubble). As we know, there's an inverse correlation between US Treasury bond yields and stock-market returns.

Regardless of the Fed, though, it is in the narrative we spin around this bubble that you'll find the frothiest behavior. That's where the bubble gets its name, and that comes from us.

So what shall we call this one?

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• Maverick Capital started testing a quant strategy in two funds two years ago. Starting next year, investors will be able to give the firm money to invest in these funds.
• Maverick's move drew attention because the firm is known for running a fundamental, stock-picking approach.
• The firm has underperformed recently, with sources saying its flagship fund has lost about 2% this year.
• In a client letter, founder Lee Ainslie says the effort has shown promise. The two funds have gained in the double digits this year — 16.9% and 22.1% through August — according to separate marketing documents seen by Business Insider.

NEW YORK — Lee Ainslie's Maverick Capital may have cracked the code on quant.

Maverick recently held its investor day in New York, where it announced it would debut two quant funds to external capital. The announcement drew attention because Maverick is known for deploying a fundamental, stock-picking approach.

The firm has underperformed recently, with its flagship fund down about 2% this year, according to people familiar with the numbers.

The firm's quantitative-research effort started a decade ago, and it hasn't been easy, Ainslie said in an October 20 client letter seen by Business Insider. About two years ago, Maverick started looking into whether the alternative data sets it had researched could help its fundamental investing process, and it launched two funds internally to test it out.

"Our hope was that the data science, statistical and coding expertise and skills that we had developed over the years ... would enable Maverick to be more successful than the many fundamentally-oriented hedge funds that have found such efforts unproductive," Ainslie wrote.

"We quickly discovered why such research has proven so frustrating to many," he added. "Eventually we discovered some very- short-term alpha signals, which were not highly relevant to our long-term strategically-oriented fundamental efforts but were well suited for higher frequency systematic trading."

But things have turned up recently, he wrote (emphasis added):

"Through combining inputs from various data sets over the last few months, we believe we have begun to improve dramatically our ability to forecast revenues, cash flow and earnings of hundreds of companies across several sectors, and the number of industries and businesses for which we are developing such capabilities are both growing rapidly. Both in terms of idea generation and business monitoring, such insights should prove invaluable to our core, fundamental effort, and I believe that few, if any bottom-up investors have cracked the code."

Earlier this year, the firm included a higher-frequency trading strategy in its two quant funds, which it said had boosted returns. Broadly, Maverick has been using what it calls the Maverick Quantitative Model, which drives a tool that recommends position sizes and that flags investment positions for the Maverick team. The combo of these two strategies "has proven powerful" and shown up in the returns, Ainslie wrote.

According to market documents reviewed by Business Insider, the Maverick Fundamental Quantitative Fund gained 16.9% this year through August, while the MFQ Neutral Fund gained 22.1% over the same period. The figures are after estimated fees, the documents said.

The first fund targets a 40% net exposure, while the second fund targets a 0% net exposure, the letter said.

A Maverick spokesman declined to comment.

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• Matthew Edmonds, the president of hedge fund Hutchin Hill Capital, is set to leave next month, according to people familiar with the matter. 
• The fund has struggled in 2017, with the flagship fund down 3.1% at the end of August.
• The firm decided to close its long/short credit portfolio, and cut back on staff. 

Matthew Edmonds, the president of $2 billion hedge fund Hutchin Hill Capital, is set to depart after a difficult year for the firm, people with knowledge of the matter said. 

Edmonds has been in his position since 2014. Edmonds couldn't be reached for comment. His departure follows a tough run for the firm, which was started by Neil Chriss, a former managing director at SAC Capital. 

The firm's flagship fund was down 3.1% at the end of August, according to a September investor letter seen by Business Insider. The poor performance was driven by the firm's fundamental long/short credit portfolio within fixed income and currencies, with the equities and macro books delivering returns of 1% and 1.5% respectively.

"Starting from early February of this year we experienced our largest Credit drawdown in the history of the firm, specifically within the Long/Short Credit portfolio," Chriss said in the letter. 

As a result, the firm "eliminated" the credit portfolio, according to the investor letter, and cut staff. It also focused resources on its top-performing teams in its quantitative, macro and equities units. 

"We have made a number of pro-active decisions to focus Hutchin Hill on our highest conviction performers across the investment teams to get our performance where we expect it to be," the letter said. "I’m very confident that the decisions we have announced today will help us achieve our performance goals."

The firm now has around $2 billion in assets, according to a person familiar with the matter. It had $2.8 billion at midyear, according to a ranking from Absolute Return. 

The firm's diversified alpha master fund returned 4.6% last year, according to HSBC data. The firm launched in 2008 with $300 million from billionaire James Simons, founder of Renaissance Technologies.

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• Maverick Capital, a $10.5 billion hedge fund run by Lee Ainslie, told clients that its disappointing performance is about to turn up.
• That's based on past experience, Ainslie told clients in a letter.
• Ainslie wrote: "Previous to this current period, Maverick had only suffered eleven five quarter periods with negative returns in our history, and Maverick has delivered positive returns in the following year every time."

Maverick Capital, a $10.5 billion hedge fund that's been having a rough year, says it's just about to turn up.

The firm's flagship fund is down about 2% this year, people familiar with the matter said. In an October 20 letter to clients, the firm said it's expecting an uptick – because that's what has happened every other time in the firm's 24-year history.

Here's founder, Lee Ainslie, on the firm's chances of recovery, with emphasis added. For background, the Dallas-based firm launched in 1993.

"I believe our historical recoveries after previous disappointing periods plays a role in this collective confidence. Previous to this current period, Maverick had only suffered eleven five quarter periods with negative returns in our history, and Maverick has delivered positive returns in the following year every time. Indeed, the current period reminds me of 2011, when we suffered through a five quarter period that was slightly worse than the past five quarters. After that disappointing period, we had an exhaustive review of our portfolio (which led us to increase certain positions and eliminate others – just as we have done over the last few months), revamped our team, and made several meaningful improvements to our process. These changes led to one of the strongest multi-year periods in our history, and I believe we are poised for another period of sustained success."

0% performance fees

The client letter, which recaps the firm's investor day in New York earlier this month, also discusses the debut of a share class for existing investors that includes no performance fees before hitting the client's high watermark. 

That fee class allows existing investors to invest up to 50% of their current balance, charging a 1% management fee and no performance fee until current high water marks are hit, the letter said.

The firm has also lowered other fees via new share classes. Maverick is charging anywhere from 1 and 10 on capital that is committed for five years, to 2 and 20 for investors who agree to one year, for instance.

In the client letter, Maverick said it has received fresh money from investors over the past two years, despite the disappointing performance.

Maverick told clients earlier this year that its underperformance was related to, among other things, its short book.

"The median stock in our investable universe was up 7.7% in the first half of the year, and our shorts were up 12.6% — outperforming (to our detriment) the median stock by almost 5%," Ainslie wrote in the a client letter over the summer, which was previously covered by Business Insider.

Maverick's flagship fund was down 10.6% last year after fees, according to performance numbers reported in client documents.

A Maverick spokesman declined to comment.

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• Odey Asset Management's assets under management have halved since 2015.
• Founder Crispin Odey admits in a letter to investors that his recent record has been "not good."
• Odey continues to make bearish bets on the state of the global economy.

LONDON — Top London hedge fund manager Crispin Odey has admitted to clients that his record over the last two years has been "not good" after assets under management halved.

Bloomberg reports that Odey wrote in a recent letter to clients: "Having called these markets down in 2015, my record on such calls is not good."

Assets under management at Odey's hedge fund Odey Asset Management have fallen from $11.7 billion at the start of 2015 to $5.5 billion in September this year.

Odey, who famously made clients money during the 2008 financial crisis, has made a serious of bearish bets on the global economy, predicting another crash. But the bets against bonds and stocks buoyed up by loose monetary policy have so far failed to pay off.

Odey Asset Management did not immediately respond to Business Insider's request for comment.

Despite the recent poor performance, Bloomberg reports that Odey is doubling down on his bearish bets, telling clients in his letter that stock markets are "now starting to go hyperbolic" in a sign that a crash could be on the horizon.

"The idea that we will continue along the lines of the last 10 years looks a dangerous starting point for strategic thinking," Odey wrote in his letter to investors.

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• Envision Healthcare is getting slaughtered. That means activist hedge funds Corvex Capital and Starboard Value are feeling the burn too.
• They were warned, though. Envision has caught ire from Washington and the media for its billing practices.

Envision Healthcare fell as much as 35% in Wednesday's trading day after missing analyst earnings per share estimates ($0.73 vs. consensus of $1.88) and cutting guidance for Q4.

Now maybe you've never heard of this healthcare company, which operates ambulatory and billing services, but it's caught the attention of both Wall Street and Washington.

Two of Wall Street's biggest activist names are getting walloped as the stock plumets. Both Keith Meister's Corvex Capital and Starboard Value, founded by Jeff Smith, have stakes in the fund and have been agitating for change at the company. Starboard especially believes that if it improves its margins, it could be a nice takeover target.

That's all very good, but Washington sees something totally different when it looks at this stock. This summer the New York Times highlighted a Yale study that showed EmCare, the billing division of Envision, was pushing patients to out-of-network services and overbilling them. 

Here's a slice from the NYT piece:

The researchers focused on 16 hospitals that EmCare entered between 2011 and 2015. In eight of those hospitals, out-of-network billing rose quickly and precipitously. (In the others, the out-of-network rate was already above 97 percent, and it did not go down.) They also looked at a larger sample of 194 hospitals where EmCare worked and found an average out-of-network billing rate of 62 percent, far higher than the national average.

Senator Claire McCaskill (D-MO) then started making noise about the company on Capitol Hill, and launched an investigation into the company.

Now there are some on Wall Street who saw this coming. That's because McCaskill isn't the only one sick of Envision. So are all the insurers, medical professionals, and hospitals that work with the company and have seen costs go up.

Here's how a short analyst report posted on Value Investors Club put it back in February [emphasis ours]:

While we believe the company can generate decent FCF near term through an accretive acquisition strategy, longer term EVHC will struggle to deliver organic FCF growth and buckle under the weight of its debt.  

The issues facing the company are: physician “partners” leaving, commercial reimbursement practices becoming less generous and hospitals increasingly cancelling or altering contracts due to aggressive business practices coming to light.  The current net leverage is fairly substantial at over 4x and we think this magnifies the downside potential on the stock.

Cat's out of the bag.

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• Bill Ackman's Pershing Square has seen assets drop $1.6 billion in five months.
• The firm managed about $11 billion at the end of May and about $9.4 billion at the end of October.
• The firm's Pershing Square Holdings vehicle is down 3.3% for the year through October.
• News of the asset drop follows Ackman's decision to restructure his unprofitable Herbalife short.

Assets at Bill Ackman's Pershing Square have dropped by $1.6 billion in five months.

The firm managed about $11 billion at the end of May and about $9.4 billion at the end of October, according to the website for Pershing Square Holdings, a publicly traded Pershing vehicle. That latest figure includes $500 million Pershing Square recently raised to target Automatic Data Processing, the human-resources firm.

Pershing Square Holdings, which is considered a proxy for the flagship hedge fund, is down 3.3% for the year through October.

The fund was up 4.3% this year through May but lost 2.1% through October. That suggests assets have dropped, in part, because of redemptions.

Pershing Square investors can redeem one-eighth of their capital per quarter, meaning it takes two years to redeem in full. A significant portion of the firm's assets, about $4.3 billion out of $9.4 billion, are held in Pershing Square Holdings and cannot be redeemed.

Pershing Square is an activist hedge fund, meaning it takes positions in stocks of companies it hopes to change.

The fund has been on a campaign to shake up ADP and has a position in Chipotle.

Ackman said earlier this week that Pershing Square had exited its short position in Herbalife and was betting against the company with options. The activist took a $1 billion bet against the nutritional supplements company in 2012, planning for the stock to fall, but it has since risen.

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• Renaissance Technologies, the legendary and secretive hedge fund cofounded by conservative donor Bob Mercer, has been making a ton of money lately, and is attracting new investors.
• Mercer just announced he would be stepping down from his role as co-CEO, but will stay on as a researcher at the firm.

Renaissance Technologies, the legendary and secretive hedge fund cofounded by conservative donor Bob Mercer, has been crushing competitors.

All three of its funds are up in the double digits this year, according to a person familiar with the firm. These are the numbers this year through October:

1. Renaissance Institutional Equities Fund 15%
2. RIDA 10.5%
3. RIDGE 14%

By comparison, the average hedge fund is up 5.7% this year through September, according to data from HFR. October figures weren't yet available.

Investors have given Renaissance $1 billion in the month of November, the person familiar with the firm said. The hedge fund now manages more than $50 billion.

The Long Island-based firm has been raising money for some time, growing by more than $6 billion in the first half of 2017, according to the Absolute Return Billion Dollar Club ranking.

Renaissance is one of the hedge fund industry's most notable funds, known by investors for its consistently high returns.

Mercer told clients in a letter Thursday that he would be stepping down from his role as co-CEO – he will remain as a researcher – and selling his stake in Breitbart to his daughters - including Rebekah Mercer, a Republican donor who served on the executive committee of President Donald Trump's transition team.

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• Bridgewater's Pure Alpha strategy, which managed about $75.8 billion as of the end of September, was down through that month, according to client documents.
• The strategy is long stocks, short bonds, and long emerging-market currencies versus the dollar and the euro, according to the documents.
• Bridgewater now has one quarter to turn around performance. If it finishes down for 2017, it would be the first down year in over a decade.

NEW YORK CITY — The world's largest hedge-fund firm, Bridgewater Associates, is facing the possibility of an annual loss in its biggest strategy for the first time in more than a decade.

Bridgewater's Pure Alpha II has lost about 2% after fees this year through September, according to client documents, a slight gain from end of July, when it was down 2.8%. The strategy has posted gains each year since at least 2005.

The Pure Alpha II fund is the biggest of the firm's Pure Alpha strategies, running what it calls 18% volatility, with about $36 billion as of the end of September, according to a person familiar and documents.

There are other Pure Alpha funds and managed accounts that run multiple volatility levels deploying a similar strategy.

For example, a smaller fund running the same strategy, the Pure Alpha 12% Strategy, is down about 1% this year through September, according to documents. That fund manages about $10 billion, according to a person familiar with the numbers. Pure Alpha 12% is potentially facing its first lost since 2000, when it lost about 3.5%, according to client documents.

The Pure Alpha strategy managed about $75.8 billion in total as of the end of September, according to a person with knowledge of the figures — a huge chunk of the firm's $160 billion in assets.

Bridgewater's Pure Alpha was long stocks and short bonds at the end of the third quarter, according to a document. The strategy is also

• long bonds in emerging markets,
• long emerging-market currencies against the dollar and euro,
• long the dollar against developed currencies,
• long oil and other industrial commodities, and
• long gold.

These positions reflect public statements Dalio has made, as well as research notes to clients over recent months. For instance, in August, founder Ray Dalio told clients that they should put 5% to 10% of their assets in gold. And Dalio has said that the Federal Reserve may be making a mistake in moving to raise rates, and that "the risks are asymmetric on the downside."

Bridgewater manages money for some of the world's largest public and private pensions, university endowments, and other institutional investors. Dalio has recently been promoting his book, "Principles," about his firm's infamously eccentric culture. Dalio has spoken with Business Insider and a number of other media outlets over the past several months while promoting the book at Wall Street conferences and on LinkedIn and Twitter.

Dalio did not respond to messages seeking comment. Prosek Partners, Bridgewater's external public-relations firm, declined to comment.

Underperformance

Bridgewater tells clients that its Pure Alpha 12% strategy should underperform the stock market when it rises, and outperform when the market loses. In the client documents, the firm said that the average market return for the S&P 500 during positive quarters is 6%, whereas Pure Alpha's average return is 2.4%.

Pure Alpha 12% is underperforming that spread. It's down -1% through September compared to a 12.5% gain in the S&P 500 over the same period. In recent years, it has delivered returns of between 0.6% and 3.5% per year, according to client documents.

Bridgewater's other big strategy, All Weather, has fared better, gaining about 7% this year through September after fees, documents show. The strategy made a 3.5% gain in the third quarter. Its returns have been volatile, however, in recent years.

Here's All Weather's annual performance:

• 2016: +10%
• 2015: -7%
• 2014: +7.5%
• 2013: -4%
• 2012: 15%

The All Weather strategy managed $53 billion as of the end of September, according to the person with knowledge of Bridgewater's assets.

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