Friday, 28 April 2017
Last updated 5 hours ago
Apr 20 2017 | 5:38pm ET
John Burbank’s Passport Capital is reportedly closing its long/short equity fund and will return capital to investors amid poor performance, redemption pressures and staff departures.
The fund, which managed approximately $833 million as of the end of last year, is down -2.09% for the year to date through February and lost 11.7% in 2016, according to a Bloomberg article citing an unidentified investor familiar with the performance.
Passport’s flagship hedge fund, named Passport Global Strategy and managed by Burbank, will reportedly remain open despite 2017 YTD losses of more than 8% through the end of March and 17% last year. The weak performance, cited in an Institutional Investor article last week, has weighed heavily on AUM at the firm; Passport managed approximately $2.6 billion in regulatory assets as of January 31, 2017, down from $4.54 billion in February 2016.
The Global Strategy fund bucked most of the industry in 2015, gaining 10.1% in a year when most long/short equity funds struggled. However, Burbank’s bearish expectations, anchored on skepticism about central bank policy and economic growth, were not in synch with last year’s ultimately buoyant equity market. As performance has suffered, investors have headed to the exits – including a January 2017 decision from $8 billion San Bernardino County Employees Retirement Fund to pull its capital from Passport as part of a strategic shift away from long/short equity managers.
Founded by Burbank in 2000 with $800,000 borrowed from friends, San Francisco-based Passport rose to prominence during the financial crisis through Burbank’s correct prediction that the subprime lending industry was about to implode. The trade generated 219% returns for the fund in 2007 and a cool $370 million for Burbank that year.