Last year TheStreet.com founder and ubiquitous financial markets commentator Jim Cramer resigned from his New York-based hedge fund to devote even more time to his many media gigs. There’s no need for him to hurry back.
By Hal Lux
September 2001
Institutional Investor Magazine
Last year TheStreet.com founder and ubiquitous financial markets commentator Jim Cramer resigned from his New York-based hedge fund to devote even more time to his many media gigs. There’s no need for him to hurry back.
In its first year without Cramer, the hedge fund that still bears his name is pummeling general market returns. In fact, Cramer, Berkowitz & Co. sans Cramer is outperforming the hedge fund’s relative long-term record with Cramer. According to hedge fund investors, Cramer Berkowitz had posted gross returns of 11 percent through July - about 8 percent after investor fees are deducted - compared with -8.26 percent for the Standard & Poor’s 500 index. On Cramer’s watch the fund beat the S&P 500 by an average of 10 percentage points each year between 1992 and 2000, while posting an average annual compounded return of 24 percent.
Cramer confirms the impressive performance numbers generated by his successor, Jeffrey Berkowitz. “I’m thrilled,” he says. “I have a lot invested psychologically in him. I went and stuck out my neck with all the fund’s investors when I left and told them to stay. Some of them didn’t know Jeff.”
For all the publicity surrounding Cramer, very little gets reported about his former hedge fund. The $400 million operation doesn’t submit its numbers to hedge fund databases, and even the chatty Cramer avoids talking about it in detail.
But some particulars about Cramer Berkowitz have been circulating recently in the hedge fund world, because it is quietly raising money through Deutsche Bank. The press-shy Berkowitz confirms that the fund is looking to expand. “I think our style is going to outperform in this market,” he says. “Do I believe our style can support a multibillion-dollar fund? No. But we have room.”
Cramer, who remains a large investor in Cramer Berkowitz, supports the fundraising. “I thought he should go to $750 million,” he says.
The fund gained some of its recent profits by shorting the temporary tech bounce at the beginning of the year, according to one investor. The firm continues to employ the frenetic trading style that Cramer favored. “Cramer Berkowitz is an opportunistic long-short hedge fund,” says a document written for potential investors. “We are an aggressive, trading-oriented firm. . . . Our trading desk can be matched against most on the Street. Frequent trading allows us to lever our disproportionately large commission dollars into instant liquidity. Trades are often closed quickly to lock in the ‘easy’ profit.” The document says that the fund doesn’t leverage its positions and rarely holds more than 10 percent of any company.
A former Goldman Sachs computer hardware analyst, Berkowitz joined the hedge fund in 1992 and became a partner the following year. The firm has two other partners. One, Todd Harrison, is a former trader with Morgan Stanley and hedge fund Galleon Group who’s also become a well-known talking head, as a financial markets commentator on TheStreet.com and CNBC. The other is Matthew Jacobs, a former investor relations professional.
Despite all the recent media hoopla about hedge funds, many celebrated equity practitioners are having a lou-
sy year. Zweig-DiMenna, run by well-known investor Martin Zweig, was down 20 percent through the end of July. Bowman Capital, run by former Fidelity Investments tech manager Larry Bowman, was down 24 percent in its Bowman Capital Founders Offshore fund. Last year’s hot equity hedge fund launch, Bessent Capital Management, has also been a dud.
Berkowitz says it’s been tough to make a buck this year. “It’s the hardest I’ve ever seen,” he says. Cramer and his successor remain close friends, and Berkowitz says he misses his theatrical partner. Without Cramer, he says, the place is awfully quiet.
