Another well-known hedge fund manager is packing it in.
Alan Fournier — who started his Summit, New Jersey-based firm Pennant Capital in 2001 with $12 million from his former boss and mentor, Appaloosa Management founder David Tepper — told clients he is returning their capital following a period of lackluster returns and will convert his firm to a family office. The news was first reported by Bloomberg.
“While I take great pride in our long term returns, especially in light of our consistent low risk portfolio structure, our recent returns have been disappointing,” Fournier wrote in a letter sent to investors yesterday. “I have been frustrated by our inability to match our historical results and deliver appropriate returns for our investors.”
The firm manages $1.5 billion. Its long-short equity hedge fund has posted an annualized gain of 11.9 percent since its inception, compared with a 6.4 percent return for the Standard & Poor’s 500 stock index over the same period, according to the letter, but the fund returned just 2.4 percent since the beginning of 2014, according to Bloomberg, which cited people with knowledge of the fund’s performance.
Fournier joined Appaloosa in 1996 and was in charge of the firm’s equity investments. Pennant’s assets hit about $7 billion in 2014, but after a few years of big gains — and a loss reported by Bloomberg of only 2 percent during 2008, when the stock market fell nearly 40 percent — assets declined. Fournier said the firm intends to return “a substantial portion” of investors’ capital by the end of April, according to the letter.
His decision to return outside money follows a rash of high-profile hedge fund closures last year. These include Tiger Cub John Griffin’s Blue Ridge Capital Management,Whitney Tilson’s Kase Capital, Neil Chriss’s Hutchin Hill Capital, Hugh Hendry’s Eclectica Asset Management, and Eric Mindich’s Eton Park Capital Management.
