‘Hot’ Mutual Fund Manager Sets Up Hedge Fund

Sep 10 2008 | 11:02am ET

“America’s hottest investor” is set to try his hand at running a hedge fund.

Kenneth Heebner, who runs the top-ranked U.S. stock mutual fund, aims to raise as much as $5 billion for the new fund, called Wayfarer Capital. The nascent fund has already collected $73 million from high-net worth and institutional investors, according to regulatory filings.

Fortune magazine dubbed Heebner “America’s hottest” in May, as his CGM Focus Fund was posting the best year of any U.S. equity mutual fund. Focus returned 17% in the year through June; during the same period, the Standard & Poor’s 500 fell by 12%. The sizzling performance—and accompanying publicity—sent investors to Heebner’s Capital Growth Management in droves: Focus’ assets under management more than tripled during the year ended in June to $10.4 billion.

So far, those new investors have not been rewarded: Focus has fallen by 29% since the beginning of July. But that apparently hasn’t fazed Heebner, who disclosed the formation of Wayfarer as a private investment partnership in an August filing with the Securities and Exchange Commission.

Heebner’s mutual funds employ a macro strategy. Unlike most other mutual funds, his allow him to ape several tried-and-true hedge fund tactics, including short sales and concentrated sector bets.

Heebner, who has managed mutual funds for almost 40 years, and partner Robert Kemp spun off Boston-based CGM from Loomis Sayles in 1990.

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