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Highfields is Latest High-Profile Hedge Fund to Shut Down

The $12 billion firm founded by Harvard Management alum Jonathon Jacobson is returning investor capital and converting to a family office after a years-long spell of underperformance.

Boston-based Highfields Capital Management told investors it is returning all of their capital and converting to a family office, according to its third-quarter letter, obtained by Institutional Investor.

The news was first reported in The Wall Street Journal. Highfields manages about $12 billion, making this one of the biggest hedge fund shut downs in recent years. The firm is headed by Jonathon Jacobson. 

The firm, which describes itself as a value-oriented investment manager, has compounded at 10.2 percent since its inception in 1998, compared with 6.7 percent for the MSCI World index and 7.4 percent for the S&P 500. 

However, it has delivered middling performance over the past four years. Highfields posted low- to mid-single-digit gains each year from 2014 through 2017. It was down a little more than 1 percent in September and slightly more than that so far in 2018. 

“No one feels worse about our lagging performance than I do,” Jacobson stated in the letter.

Highfields is one of two long-running hedge fund firms to announce this week that it is shutting down. Criterion Capital Management also said it is shutting down its roughly $2 billion firm after 16 years of operation, according to a separate Wall Street Journal report.

The moves are part of a broader trend in the hedge fund industry, as many long-established managers are confronting disappointing performance, investor redemptions, or a combination of the two. Earlier this year Leon Cooperman said he is converting Omega Advisors to a family office.

Last year John Griffin announced he was shutting down Blue Ridge Capital, Eric Mindich said he would wind down Eton Park Capital Management, and John Burbank said he planned to shut down Passport Capital’s flagship fund.

Highfields managed $14.6 billion at its peak at the end of 2013. It subsequently returned more than $2 billion to investors. It has about $9.5 billion in outside capital, according to the Journal.

“Done correctly, money management is an all-consuming, 24/7 pursuit,” Jacobson said in the letter. “After three-and-a-half decades of sitting in front of a screen, I realized I am ready for a change.” 

Highfields said it plans to return roughly half of its investors’ capital at year-end and virtually all of the remainder by the middle of 2019. It warned, though, that it is possible, “maybe even likely,” that after that point there will be a liquidating trust of up to 10 percent of the portfolio for illiquid securities and/or special situations.

Jacobson rose to prominence as senior equity portfolio manager for the Harvard Management Company — a major initial investor in Highfields — from 1990 to 1998. 

He was joined later by Richard Grubman, then of Corporate Value Partners, and Kenneth Coburn, a former executive at Raytheon and First Boston. They each had previously retired.

In the early 2000s the firm became famous in part for its short bet against energy giant Enron. 

Jacobson started his career at Merrill Lynch Capital Markets in 1983 and later worked at Shearson Lehman Brothers from 1987 to 1990, eventually rising to president of the Equity Arbitrage Group.


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