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Berkowitz Seeking Patient Capital Sours On Mutual Funds
It's not that he's not going to manage mutual funds, but this:
------------------- Berkowitz is raising money for a partnership that takes minimum investments of $1 million, according to a January regulatory filing. He declined to elaborate when asked whether the new entity was meant to attract more patient capital.
“At this point, I can’t talk about it,” he said. “But stay tuned.” ---------------------
I still think it's amusing that he believes more money invested = more patient capital. Totally and completely incorrect. I do think if he starts up a large hedge fund, that's potentially time and attention taken away from the mutual funds. Maybe the funds were suddenly closed in order to limit size because there will be other fund/s Berkowitz is going to be focusing on?
He could do a London fund (see also Daniel Loeb and soon Bill Ackman) or do a reinsurance co (see Einhorn, Loeb, SAC). Those two methods are better ways to get permanent capital. Greenlight Reinsurance hasn't done all that well lately, but it succeeded in getting David Einhorn's goal of permanent capital.
Otherwise, interesting that Fairholme (FAIRX) has gotten even more concentrated. "More than 80 percent of the Fairholme Fund’s assets were invested in six companies as of Nov. 30. In addition to AIG and Bank of America, holdings include a 13 percent stake in Sears Holdings Corp. (SHLD) and 25 percent of real-estate developer St. Joe Co., the largest private landowner in northwest Florida, data compiled by Bloomberg show."
Vinik managed the Fidelity Magellan Fund from 1992 to 1996, where he averaged 17% annual returns. After leaving Fidelity, he started a hedge fund called Vinik Asset Management. He made investors 93.8% in his first 11 months and approximately 50% a year for the next three years. At the end of 2000, Vinik returned investors $4.2 billion and focused on managing his own portfolio. Regards, Ted Source: Wikipedia
Reply to @scott: i agree that partnership (i.e. hedge fund) will give hime 'somewhat' more patient capital, but no assurances. let's say that he'll institute a one-year lock up with quarterly redemptions thereafter. even with this model, after a really bad year, he'll have most investors alligned for the first available redemption date. He might of course impose a gate, but this will not win him investors either.
If he has bi-polar returns, I am afraid money will still take flight even with $1 mil. investment minimums. He can tie the money to lockup periods so much.
As Scott, given example the book "Confessions of Street Addict" several times, Jim Cramer, while he was running his hedge fund experienced investors taking money when he needed to keep long term view. So, good luck to Berkowitz.
Having said that he had a much less bi-polar investing style in the first 5 years. In the last 5 years cold-hot episodes resulted in the fund producing less than S&P 500 Index.
Reply to @Investor: To actually quote a few snippets from the book: ""When I told Karen about Eliot (Spitzer)'s request that night, she said I had to honor it and open the fund for everyone. But she told me that I had better brace myself for massive redemptions, given that I was down for the year..."
"Nonsense, I told her. After year upon year of beating just about everyone, I had nothing to worry about. Most people wouldn't pull, I said. They would just toss the opening notice, which would allow them to pull their money out during the first five business days in October, into the waste pile."
"Karen just said, "'You'd better brace for a run.'"
Comments
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Berkowitz is raising money for a partnership that takes minimum investments of $1 million, according to a January regulatory filing. He declined to elaborate when asked whether the new entity was meant to attract more patient capital.
“At this point, I can’t talk about it,” he said. “But stay tuned.”
---------------------
I still think it's amusing that he believes more money invested = more patient capital. Totally and completely incorrect. I do think if he starts up a large hedge fund, that's potentially time and attention taken away from the mutual funds. Maybe the funds were suddenly closed in order to limit size because there will be other fund/s Berkowitz is going to be focusing on?
He could do a London fund (see also Daniel Loeb and soon Bill Ackman) or do a reinsurance co (see Einhorn, Loeb, SAC). Those two methods are better ways to get permanent capital. Greenlight Reinsurance hasn't done all that well lately, but it succeeded in getting David Einhorn's goal of permanent capital.
Otherwise, interesting that Fairholme (FAIRX) has gotten even more concentrated. "More than 80 percent of the Fairholme Fund’s assets were invested in six companies as of Nov. 30. In addition to AIG and Bank of America, holdings include a 13 percent stake in Sears Holdings Corp. (SHLD) and 25 percent of real-estate developer St. Joe Co., the largest private landowner in northwest Florida, data compiled by Bloomberg show."
Vinik managed the Fidelity Magellan Fund from 1992 to 1996, where he averaged 17% annual returns. After leaving Fidelity, he started a hedge fund called Vinik Asset Management. He made investors 93.8% in his first 11 months and approximately 50% a year for the next three years. At the end of 2000, Vinik returned investors $4.2 billion and focused on managing his own portfolio.
Regards,
Ted
Source: Wikipedia
As Scott, given example the book "Confessions of Street Addict" several times, Jim Cramer, while he was running his hedge fund experienced investors taking money when he needed to keep long term view. So, good luck to Berkowitz.
Having said that he had a much less bi-polar investing style in the first 5 years. In the last 5 years cold-hot episodes resulted in the fund producing less than S&P 500 Index.
better brace myself for massive redemptions, given that I was down for the year..."
"Nonsense, I told her. After year upon year of beating just about everyone, I had nothing to worry about. Most people wouldn't pull, I said. They would
just toss the opening notice, which would allow them to pull their money out during the first five business days in October, into the waste pile."
"Karen just said, "'You'd better brace for a run.'"
http://books.google.com/books?id=VUtYn0VRHvsC&pg=PA187&lpg=PA187&dq=Cramer+Confessions+Street+Redemption+Garbage&source=bl&ots=NRRbn2_zk5&sig=BIoGhMV9eOP5Rm-tbjoGAygmCNw&hl=en&sa=X&ei=IVAQUdu3JcrxygG1l4CIDA&ved=0CDUQ6AEwAQ#v=onepage&q=Cramer Confessions Street Redemption Garbage&f=false
Here's recent SeekingAlpha post on our hero: Bruce Berkowitz Expects To Make 4 Times His Money On His Core Holdings.
I'm inclined to agree.