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Boston's hedge fund, Highfields Capital Management, brings billions of dollars back to its customers and has become a family office, said founder Jonathon Jacobson in a letter to investors on Wednesday.
The decision to return money to investors is one of the largest hedge fund closures in recent history. Mr. Jacobson created the $ 12.1 billion investment company in 1998 after leaving his post-trading shares for Harvard University staffing. Harvard was the first client of Highfields, which has about $ 9.5 billion in outside money.
"Well managed, money management is a task that consumes 24 hours a day, 7 days a week … After three and a half decades spent in front of a screen, I realized that I'm ready for a change," said Mr. Jacobson, 57 years old. old, wrote. "The problem was that I just could not pull the trigger to make a multi-year commitment to a few key hires."
Jacobson's decision to return money, which he described as "more difficult than ever", is the last closure of a high-level manager during a difficult period for hedge funds. This year, and until August, equity hedge funds returned an average return of 2.3%, compared with 10% for the S & P 500, including dividends, according to research firm HFR. Some companies have cut their relatively high fees, while others have closed their doors and returned money to their customers.
In recent years, many well-known hedge fund managers have closed their businesses. Among them, investor Eric Mindich announced that he would close his $ 7 billion hedge fund company, Eton Park Capital Management LP, in 2017, and billionaire Richard Perry announced his decision to close its hedge fund company in 2016.
While hedge funds on and on stocks struggle to keep pace with bull markets, several years of poor returns have challenged investors' patience.
"Our results for 2018 and those of the last few years have clearly not met my expectations or yours," wrote Jacobson in the letter. "The investment environment has been and continues to be very treacherous, and it's certainly not very supportive of our investment style, but that's what it is, and nobody feels worse than mine regarding our late performance.
Highfields was managing up to $ 14.6 billion by the end of 2013 and then reported more than $ 2 billion in client money. This year until September, his funds have lost more than 1%. Its annualized return over two decades is 10.2%, said a person familiar with the subject.
In an industry with a strong personality, Mr. Jacobson and his co-founder Richard Grubman, who retired in 2010, have kept relatively low profiles.
But they received a profit notice for a bet against Enron Corp., which eventually filed one of the biggest bankruptcies in US history. Mr. Grubman in particular drew attention when his difficult questioning caused Enron's president, Jeffrey Skilling, to exercise good judgment by referring to Mr. Grubman during an investor conference call.
Highfields lost money in 2008 during the financial crisis, but largely offset it at the end of 2009.
Jacobson had been planning to close Highfields for several months, a person familiar with the company said. Last week he made a decision without having a clear idea of his next steps, except for his goal of reducing the company's portfolio and helping employees find new ones. jobs.
The company plans to return to its investors about half of their money by the end of 2018 and the bulk of the rest by mid-2019. Some of the client's money may be locked into a liquidation trust for illiquid securities. Highfields will stop charging management fees after 2018, he wrote.
Mr. Jacobson added that some employees would likely launch their own funds and support them with their time and money.
"A lot of my long-time mentors and some of the people I admire the most go still in the 70s and 80s and, God willing, I intend to do some same, "wrote Jacobson.
Corrections & Amplifications
The hedge fund manager, Jonathon Jacobson, announced to his clients Wednesday that his company, Highfields Capital Management, would return their money. An earlier version of this article had misspelled his name, Jonathan Jacobson. (October 3, 2018)
Write to Juliet Chung at [email protected]
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