This content is from: Portfolio

Assets Fall at Passport as Performance Plummets

The San Francisco hedge fund firm, known for its volatile returns, is experiencing hefty redemptions following a period of employee turnover and big performance losses.

  • Imogen Rose-Smith

John Burbank III, founder of San Francisco-based Passport Capital, has a reputation for being a sometimes-brilliant investor who makes big bets that can reap huge gains — or go spectacularly wrong. Lately, the firm’s investments have fallen into the latter category, sources say, and the firm is rapidly shedding assets and experiencing employee turnover.

Passport’s assets have fallen substantially since early 2016, when the firm reported managing $4.54 billion as of February 1. In a regulatory filing dated March 30, 2017, Passport said it manages approximately $2.6 billion, and a former employee familiar with what is happening at the firm says Passport is bracing for significant second-quarter redemptions. This person and another individual familiar with the situation say layoffs are expected at the firm, which currently employs about 60 people.

Performance woes are largely behind the firm’s troubles, sources say. Passport’s flagship fund — the Passport Global Strategy fund, managed by Burbank — is down 8.37 percent for the year through March, making it one of the poorest preforming hedge funds this year out of a group tracked by HSBC’s Alternative Investment Group, which publishes a weekly hedge fund performance review. That fund lost 17.58 percent in 2016, making it one of the biggest losers on the HSBC list. It has produced an annualized return of about 14 percent since its inception in July 2000, according to HSBC, which lists the fund’s assets under management at $939 million.

The firm’s Passport Special Opportunities Fund, also managed by Burbank, was the third-poorest performing fund in that universe, losing 26.42 percent in 2016 and falling a further 1.8 percent this year through January. It has annualized at 6.95 percent since its April 2008 inception, according to HSBC, and managed $354 million through mid-November 2016. A third Passport fund, the $636 million Passport Long Short Strategy Fund, is down 3.37 percent this year and lost 11.77 percent last year, according to HSBC. That fund is now managed by Burbank, having previously been run by portfolio manager and risk management chief Tim Garry, who left the firm in January of 2016. It has annualized at 3.29 percent. The hedge fund firm, which had a strong 2013 and 2012, no longer lists its assets or staff on its public website.

Stanford University MBA Burbank, 53, founded Passport in 2000, having joined the hedge fund industry in 1996 after spending some time in San Francisco’s venture capital community. He launched Passport with $800,000 from a friend, initially losing money in the dotcom crash of 2001 before putting up big returns in its aftermath.

In addition to its recent poor returns, Passport has experienced the loss of key personnel. Last year Garry, marketing head Bill Nolan, and head trader David Tillman all left the firm within a nine-month period.