Leon Cooperman Blames ‘Risk Parity’ Investors Like Bridgewater Associates For Exacerbating Market Tumult

According to the investor letter, Omega’s funds concentrated in equity investments tumbled by between 9% and 11% in August, dragging them down to dips of 6% and 11% year-to-date. These figures are consistent with Leon Cooperman’s top stock picks’ decline during August. Omega Advisors’ top stock picks at the end of June were Allergan PLC (NYSE:AGN), AerCap Holdings N.V. (NYSE:AER), and Sunedison Inc (NYSE:SUNE), which fell by 8.27%, 10.25%, and a massive 55.32%, respectively, over the course of August. The poor performance of Omega Advisors last month can partly be attributed to it vacating short positions more and more, in light of the recent U.S. bull market. In August, the S&P 500 lost 6.25% while the Dow Jones lost 6.57%, weighing down on Omega Advisors’ equity-focused funds.

The down market, which may have been influenced by risk parity, is not only affecting firms like Omega Advisors. Activist investors like Bill Ackman’s Pershing Square and Barry Rosenstein’s JANA Partners have also been hit hard in August. According to people briefed on these funds’ performance, Pershing Square lost 9.2% while JANA Partners tumbled by 4.3% in August. Activists generally hold long positions for the longer term while trying to influence unlocking of more shareholder value through reforms.

Nonetheless, Leon Cooperman is not downtrodden about the future of the markets. In the letter, he says that he thinks the end of 2015 will see U.S stocks climb. He says that Omega Advisors believes “that the bulk of U.S. equity market damage has been done.” If the bull market has ended, this would be the “oddest ending to a bull market in the postwar period,” the letter notes.

Disclosure: None