NEW YORK: John Burbank’s Passport Capital, which shot to fame for its lucrative bet against subprime housing ahead of the global financial crisis, will shutter its flagship hedge fund after returns slumped.
The fund’s “returns over the past two years are unacceptable and cause me to rethink how to manage money in this environment,” Burbank wrote in a Dec 11 letter to investors, the contents of which were first reported in the Wall Street Journal.
Passport will continue to focus on its Special Opportunities Fund and the Saudi share class, according to the letter. “You will not hear about Passport shutting down – there is too much opportunity available to do that,” Burbank wrote, adding that the firm may announce a new area of investment in the near future.
Hedge fund liquidations worldwide outpaced starts for seven consecutive quarters through June, according to data from Hedge Fund Research Inc, which estimated that 481 funds were liquidated in the first half of this year, compared with 369 new launches.
As investors balked at their mediocre returns and high fees, more than half of funds globally lost assets in September and October, eVestment data showed.
Burbank founded Passport in 2000 and is best known for his big bet on a tumble in subprime mortgages in 2006. His fund made 220% the following year. Passport’s assets hit a peak of about US$5bil before a double-digit loss last year and more losses in 2017, the Wall Street Journal said, citing unidentified investors.
Passport’s assets declined to US$2.4bil in April, then plummeted further to US$900mil amid client withdrawals and after it wound down its Long-Short Strategy fund after an “incredibly disappointing 2016,” Bloomberg reported earlier this year. — Bloomberg
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