Ex-SAC Manager Launches Long-Only Fund
Last year Suvretta Capital generated its smallest gain since inception.
A former SAC Capital Advisors bigwig officially launched a long-only fund at the beginning of the year. The launch comes after his firm’s flagship long-short fund completed its worst year since inception.
Suvretta Capital Management, founded by CIO Aaron Cowen, started trading in Suvretta Long Partners on January 3 with mostly internal capital. The firm, which manages about $2.6 billion, plans to raise money slowly as it seeks to build a track record without cannibalizing its Suvretta Capital long-short funds.
We earlier reported that in its letter to clients for the third quarter of 2016, the firm said it intended to launch a long-only fund, but it did not disclose the exact timing.
Meanwhile, the existing hedge fund, Suvretta Capital, gained more than 1 percent in the fourth quarter, finishing the year up 3.2 percent. Suvretta had gotten off to a rough start last year, losing 4.4 percent in the first quarter. It made money in each subsequent three-month period, though.
This wound up being the fund’s worst performance since it launched in 2012. Suvretta Capital gained between roughly 13 percent and 26 percent from 2012 through 2014; in 2015 it was up more than 7 percent. It is not known how the longs have performed over the years.
In the third quarter of last year, the long book contributed 8 percent to gross performance, while short positions reduced gross performance by 2.2 percent, mostly due to index hedges. However, we don’t know what the breakdown was in the fourth quarter.
The fund had entered the fourth quarter with a 145.1 percent gross exposure and 59.9 percent net exposure.
Going into the last three months of 2016, its five largest long positions were Adobe Systems, Amazon.com, Apple, Charter Communications, and Constellation Brands.
All of them except Adobe were among the 14 most widely held stocks by hedge funds in general as of the end of the third quarter, according to data provider Novus. Four of them were among Suvretta’s five biggest gainers in the third quarter.
In the fourth quarter these stocks’ performance was mixed. Adobe lost 7 percent, Amazon dropped more than 10 percent, and Constellation Brands lost nearly 8 percent. However, Apple was up about 2.4 percent, while Charter gained some 6.7 percent. Suvretta’s sixth-largest long — social media pioneer Facebook — also lost 10 percent.
In its third-quarter letter to clients obtained earlier by Alpha, Suvretta singled out Restaurant Brands International, which owns Burger King and Tim Hortons, asserting that it “represents tremendous value.” The company’s stock rose nearly 7 percent in the fourth quarter.
Founder Cowen started his career as an associate at Lehman Brothers Holdings; in 1997 he moved to Seth Klarman’s Baupost Group, where he worked as an analyst for two years. He then spent more than six years at Michael Karsch’s Karsch Capital Management, where he was a managing director, before joining SAC Capital, where he served as CIO for two years or so. Before launching Suvretta, Cowen spent nine months as a portfolio manager at George Soros’ Soros Fund Management.