Oh, how the mighty have fallen.
One of the more interesting things to learn from the newly required ADV filings for most hedge funds is the size — or rather lack thereof — among a number of one-time superstar managers. These are guys who either saw their firm’s size shrivel up from lousy performance or are trying to launch their next act in this newer, tougher world.
At least five well-known managers now reported assets of less than $1 billion:
Peter Thiel, Clarium Capital: Billionaire Thiel may be one of the most brilliant tech venture capitalists in the world. He co-founded PayPal and made early shrewd investments in Facebook, LinkedIn and at least a dozen other firms. However, the 44 year-old’s macro hedge fund has all but crashed and burned. After peaking with more than $7 billion under management in 2008, total AUM has crumbled to $432 million, according to his recent ADV, thanks in large part to losses of 4.5 percent in 2008 and declines in the mid-20 percent range in 2009 and 2010, as the billionaire remained bearish on the U.S. economy.
Paul Touradji, Touradji Capital: The commodities specialist has apparently missed many of the big rallies in the past few years. After peaking at around $4.5 billion in 2008, the Tiger Cub posted single-digit returns the following two years and AUM has dropped to $890 million. The volatile manager has also been embroiled in lawsuits with former partners and business associates.
Jeffrey Gendell, Tontine Associates: The former Odyssey Partner manager was a rising star in the 1990s and 2000s, racking up triple-digit gains in 2003 and 2005 in part from homebuilding stocks and very small savings & loans. However, he crashed in 2008 when most of his funds lost between 65 percent and 75 percent, and one of his funds — Tontine Partners LP fund — reportedly lost 91.5 percent. In a letter to investors in October 2008, Gendell blamed the combination of falling commodity prices, massive anticipated hedge fund redemptions and the seizing-up of the credit markets for his nightmare year. However, writings in his client letters over that year indicated he was also guilty of not grasping the magnitude of the crisis at the major financial institutions during the summer and wrongly betting that the market had bottomed in late September after Lehman Brothers filed for bankruptcy. He also was hurt by large holdings in small, illiquid stocks in which he took large stakes. Until then for many years he qualified for the Rich List, AR’s ranking of the 25 highest earning hedge fund managers. Today he manages just $478 million, down from a high of $10 billion.
Daniel Benton, Andor Capital Management: In the past year Benton has raised nearly $900 million, which is not too bad since most managers who took time off from the business or broke away from larger firms to start their own are having trouble raising large sums these days. Benton closed down his $2 billion Andor Capital Management back in 2008 when he lost money amid the global financial meltdown, citing, in part, the “desire to devote more time to my family and other interests.” Benton had spent 24 years in the investment business. Back in 1986, he co-founded Pequot Capital with Art Samberg as a division of what is now known as Dawson-Herman Capital Management. Pequot broke away from Dawson-Herman in 1999 and Benton spun-off from Pequot in 2001 to create Andor, taking roughly $7.5 billion with him in the split. At its peak in 2003, Andor managed $9.6 billion.
Jim Pallotta, Raptor Capital Management: Jim Pallotta, Paul Tudor Jones II’s one-time equity specialist and vice chairman of Tudor Investment Corp., is quietly building up his Boston-based firm. He has now raised $620 million for a number of different investment strategies, mostly venture capital and private equity funds as well as the Raptor Evolution Funds. This is a fraction of the $11 billion or so he once ran for Jones when Pallotta accounted for roughly two-thirds of Tudor Investment’s total assets. From October 1, 1993 through May 31, 2009 — when Pallotta was winding down his operations — his Raptor Global Funds compounded at nearly 14 percent per year compared with roughly 6.5 percent for the S&P 500. Including the seven years he spent running a hedge fund at Boston money-management firm Essex Financial, Pallotta compounded at nearly 20 percent per year.
