Highest Concentration
NorthStar, which has among the highest concentration of hedge fund owners among REITs, at 28 percent, acquires loans, bonds and commercial properties such as hotels, office buildings and manufactured housing.
Jade Rahmani, a Keefe Bruyette & Woods Inc. analyst, cut his recommendation on the company’s stock last week to market perform from outperform and said in a report that he expects a successful repositioning of the firm to be a “tall and likely lengthy order.” He had previously recommended the REIT based on its discounted valuation and a belief that strategic actions such as asset sales might help turn the share price around.
Senvest Fund
Senvest Partners, which boosted its stake in NorthStar to 4.2 million shares in the fourth quarter, saw its main fund lose 12.5 percent in January, according to a person with knowledge of its returns who asked not to be identified because the information is private. A spokesman for the firm declined to comment.
Orange Capital, which owned 3 million shares of the REIT at the end of December, is closing and returning about $1 billion to investors, the Wall Street Journal reported on Feb. 3.
Hedge funds are having the worst start to a year since 2008, falling an average of 1.7 percent in January, according to analysis firm Hedge Fund Research Inc. Returns have been depressed by slowing global growth, falling prices for oil and other commodities, and a strengthening U.S. dollar.
“A lot of hedge funds focus on similar types of companies,” Nierenberg said. “As volatility in the markets picks up and redemptions take place, it creates a domino effect which drives selling in the sector. I think there is a little bit of herd mentality, and that affects everyone.”
Banks Decline
REITs aren’t the only firms trading at discounts to their book value, or the amount that would theoretically be left for shareholders were a company liquidated. Some of the large banks are seeing their shares at similar discounts, Nierenberg said.