How $6 billion Balyasny trounced most hedge funds in the first quarter - and where it's focusing next after losing a top macro investor

• Dmitry Balyasny's $6 billion firm posted returns of nearly 5% in its flagship fund in the first quarter, much higher than the average hedge fund and overall market.
• One of the firm's macro investing heads, Tim Wilkinson, is set to leave the firm soon, and Balyasny has shut down trading in his portfolios.
• Going forward, Balyasny is focusing on more liquid markets in its macro strategy, "increasing our trading oriented macro strategies across rates, FX, and equities."
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Balyasny put up returns besting the average hedge fund and the overall market in the first quarter, but will soon have to grapple with the intense volatility caused by the coronavirus pandemic without one of its macro investing heads.

In the firm's first-quarter letter to investors, Balyasny wrote that Tim Wilkinson, the firm's cohead of macro investing in London, is retiring from the industry in early summer. He'll remain an advisor to the firm through 2020.

The $6 billion manager's flagship fund put up returns of 3.6% for March and 4.75% for the year so far, the letter states, as global stock markets have tanked. Hedge Fund Research's global index of hedge fund strategies is down 5.88% in March and 6.85% for the year.

"The portfolios under Tim have been closed from active trading," the letter states. It's unclear from the letter how many portfolios Wilkinson led. He joined Balyasny from rival multi-strategy fund Citadel in 2019, along with other former Citadel executives including Jeff Runnfeldt and Alex Lurye.

Peter McConnon, who joined the firm this year from Canada's main pension fund, will become the sole head of macro in London while Mayank Chamadia is still the head of macro in the US, based in New York.

The firm's first-quarter results were driven by its equity book, a departure from some of the trends the industry has experienced during the coronavirus pandemic. Macro investors and commodity speculators have generally been outperforming stock-pickers, but at multi-strategy Balyasny, the firm's equity investors - specifically in healthcare and consumer stocks - reigned supreme, the letter states.

"Our equity teams performed well by quickly updating their bottom-up, fundamental views for the new environment. Teams identified the companies likely to outperform and underperform in a deteriorating economy without clinging to previously held ideas," the letter reads. The letter also points out that the firm held "a record number of group PM calls in March," which the firm believes helped performance.

In the macro book, which made up just under 30% of the firm's book as of the end of March, performance was flat, and two portfolios were even closed for poor performance in the quarter.

"We will continue to refine our strategy sets to capture the opportunities created by sustained low rates globally. Portfolios reliant on less liquid otc markets have been reduced or closed. As we expect a continuation of volatility, we are increasing our trading oriented macro strategies across rates, FX, and equities," the letter reads.

The note to investors also touches on the response the firm has had to the pandemic, praising its IT team for allowing the firm to continue to invest from home, and detailing a donation of more than $1 million to help fight the coronavirus that included contributions from every office.

"We believe the opportunity set across our market-neutral strategies continues to be very fruitful. Volatility will likely remain high, allowing those operating from a position of strength to take advantage of dislocations and generate consistent alpha."