Activist hedge fund Marcato Capital Management gained 8.4 percent last month as its bets on Goodyear Tire & Rubber Co, NCR Corp, and its recently acquired stake in LPL Financial Holdings Inc paid off.
October's returns helped shrink the $3 billion fund's year-to-date decline to 4 percent from a double-digit loss at the end of September, a person familiar with the returns but not authorized to discuss them publicly said.
The San Francisco-based Marcato, run by Richard McGuire, saw LPL Financial's stock gain 8 percent in October. The fund had announced in mid-September that it bought 6.3 percent of the company, one of the country's largest independent broker dealers.
Stock in global technology company NCR, where McGuire joined the board nearly one year ago, jumped 15 percent during the month and Goodyear gained 12 percent. The fund's stake in Bank of New York Mellon Corp , where McGuire has urged management to cut costs and improve performance, also rose, gaining 6 percent last month.
McGuire set up Marcato five years ago after leaving William Ackman's Pershing Square Capital Management and has returned an average 9 percent a year since.
October proved a welcome relief for many investors when stronger earnings reports overshadowed earlier worries about slowing growth in China, falling energy prices, and concerns over drug company price hikes which had sent stocks reeling over the summer. The Standard & Poor's 500 index gained 8.3 percent in October.
But for many hedge funds October was still difficult due to a handful of losing bets, including on widely held Valeant Pharmaceuticals International Inc , which tumbled 47 percent. The average hedge fund gained just 1.46 percent in October, leaving it off 1.63 percent for the year, Hedge Fund Research data show.
Activist investors like Marcato, meanwhile, have lost an average 5.61 percent this year through the end of September, according to HFR. HFR's October figures for activists are not out yet.
In its September regulatory filing Marcato said it planned to discuss LPL's capital structure and capital allocation with management. By the end of October, the company announced a $500 million share buyback plan, its most aggressive ever.
During the third quarter, McGuire launched a new portfolio called the Marcato Encore fund which invests in smaller companies including investment management firm Virtus Investment Partners Inc and Continental Building Products Inc.