T2 Misses Rally, Ends Year Up 10.3%

Jan 11 2011 | 5:56am ET

Whitney Tilson’s T2 Partners returned 10.3% last year, admitting that it “completely misread” the Federal Reserve’s second round of quantitative easing.

T2 trailed the Standard & Poor’s 500 Index, which rose more than 15%, on the year. The T2 Accredited Fund gave back 3.3% in the fourth quarter due to missing out on the Fed-backed rally.

“We continued to position our portfolio somewhat defensively, which turned out to be precisely wrong as the market jumped 20.6% in the last four months of the year,” T2 told investors in a letter obtained by Dealbreaker.com. “The gains were driven by the frothiest, most speculative stocks, which are precisely the ones we tend to be short, so our profits on the long side were offset by losses on the short side such that we missed this big rally.”

But T2 wasn’t apologizing.

“We think this will end badly and we will not participate,” the firm said.

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