"We Fought Hard But Did Not Deliver": $2.2BN Hutchin Hill Is Shutting Down

With several months having passed since the last prominent hedge fund closure, the recent narrative that the 2 and 20 community was doing exceedingly well to close out the year (with long/shorts piling into tech names with record leverage), was starting to gain traction. That may have changed this afternoon, when Reuters reported that well-known hedge fund manager Neil Chriss announced he is liquidating his $2.2 billion firm Hutchin Hill Capital LP after three years of poor performance. The firm lost roughly 5.5% in the January-November period after having been up 4.7% in 2016. At one point, Hutchin Hill managed more than $5 billion in assets.

Chriss, whose firm is, or rather was, made up of various trading pods like Millennium and SAC, sent a letter to clients that the best way forward is to "proactively return capital as expeditiously as possible."

"We fought hard, but did not deliver the performance that you expected from us," Chriss wrote in the letter dated Nov. 30 and seen by Reuters on Thursday.

In the video below, recorded roughly a year and a half ago, Neil Chriss sat down at the Milken Conference to discuss the evolution of hedge funds. Liquidation was not one of the topics covered.

As Reuters summarizes, Hutchin Hill, founded in 2007, is the latest high-profile casualty in the ravaged hedge fund industry, and follows one-time icons Eric Mindich and Richard Perry who likewise made headlines when they shuttered their firms over the past two years.

"This decision is not about one year of performance, which has been disappointing," Chriss wrote. "We have not delivered on our performance goals for three years in a row."

Chriss had for some time tried to salvage the firm by cutting costs and refocusing resources.  Earlier this year, he began shuttering the firm"s credit portfolio and shifted resources to trading stocks. He also focused more on macroeconomic and quantitative investing. A year ago, Chriss shut the firm"s Hong Kong office.

 

Despite the efforts, Chriss wrote that it does not make sense to continue with a smaller team and less money under management. He said he expects all investors to get their money back by the end of the first quarter of 2018.

Chriss, who earned a doctorate in mathematics from the University of Chicago - and who probably should have just run a profitable frontrunning HFT operation or better yet, some smart beta contraption or quant fund - previously worked for Morgan Stanley, Goldman Sachs and SAC Capital, where he headed SAC"s quantitative strategies division.

In the letter he discussed Hutchin Hill"s legacy and said he was "extremely proud" of the 83.2% net cumulative return his firm returned and its 6.6 percent annual returns.

Ironically, as noted above, Hutchin Hill is shutting down just as the hedge fund industry "breathes a cautious sigh of relief as many managers are performing better and taking in new money after years of lagging behind stock market gains and taking criticism for high fees."

It remains to be seen how the industry will be breathing once the handful of tech stocks which every hedge fund is invested in, crash.

The HFRI Fund Weighted Composite Index, which tracks hedge fund performance, has gained 7.2 percent in the first 10 months of 2017, marking its best return since 2013, data from Hedge Fund Research show. Even so, in 2017 hedge funds will underperform not only the average mutual fund, but also the broader market for the 7th straight year.

Whitney Tilson Shuts His Hedge Fund... Again

Back in the summer of 2012, we had some fun when we reported that Whitney Tilson - the consummate, if always late immitator of other prominent investors especially Warren Buffett and Bill Ackman - following several years of abysmal returns, closed his then-hedge fund T2 (with Glenn Tongue), splitting off into his own, oddly-named venture, Kase Capital. Well, Whitney - who in recent years was better known for his bizarre family photos from Africa than managing money- has done it again and according to the WSJ, Tilson closed his hedge fund... again, "the latest high-profile investor to close shop amid an extended period of disappointing returns for the industry."

As the WSJ adds, Tilson, 50, shared his decision with clients (apparently he still had some) on Sunday. His latest hedge fund, Kase Capital, which was managing a whopping 50 million at the time of closure, and down from a peak of $180 million, lost about 8% so far this year, a more than 20% underperformance relative to the S&P YTD gain of more than 13%.

As the WSJ adds sarcastically, "while he ran a relatively small fund, Mr. Tilson was a well-known hedge-fund manager thanks to television and conference appearances, as well as books and regular writing about investing and other topics." In other words, Tilson was not so much a "hedge fund manager" as its straight-to-CNBC marketer, and the results have confirmed it.

In an amusing twist, in 2016 Tilson - a staunch never-Trumpter - inexplicably found himself the subject of scathing criticism by Elizabeth Warren, after Tilson expressed modest public support of some of President Donald Trump’s cabinet and other appointments from the banking world, "even though Mr. Tilson is a lifelong Democrat who voted for Hillary Clinton."

“The next four years are going to be a bonanza for the Whitney Tilsons of the world,” the Massachusetts Democrat said at the time. She later apologized to Mr. Tilson for her criticism.

And so Tilson joins a long procession of managers, some of whom managed actual real money, who decided that it was impossible to navigate these centrally planned markets and an exit was the noble way to go.

He is hardly the last one: in the past several months, a couple of well-known hedge funds have closed. Among them, investor Eric Mindich closed his $7 billion hedge-fund firm, Eton Park Capital Management LP, billionaire Richard Perry shuttered his hedge-fund firm and Hugh Hendry exited his flagship fund in London. “I died in active combat,” Mr. Hendry told Bloomberg at the time. “The last three months were harrowing.”

Many more closures are coming as investors redeem cash ahead of year-end at a pace not seen since the financial crisis.

As for Whitney, who somehow managed money for more than 18 years, the WSJ says that he is "expected to manage his own money." Considering Tilson was one of the founding, and most vocal members of "Patriotic Millionaires" group begging to be taxed more, we assume he does, in fact, have money to manage (we are not so sure about his clients) and this wasn"t just yet another marketing gimmick from the now former hedge fund manager.

Whitney"s full farewell letter below:

Dear friends,

I recently decided to close my funds and return capital to investors (excerpts from my letter to them are below). It was a hard decision, but the right one.

Now, I am filled with enthusiasm about what I will do with the second half of my life. What might that be? I’m not sure, but I want to share a few thoughts – and would be grateful for your feedback and ideas.

I’ve been working full time for more than 30 years, almost all of that time in an entrepreneurial capacity. While my one “regular” job early in my career was a good experience, I like being independent and plan to remain so. My goal is to find opportunities that are personally interesting, give me the chance to collaborate with great people, and are sufficiently remunerative (contrary to Elizabeth Warren’s belief, I am most definitely not a billionaire!).

I expect that most of my work will continue to be in the investment field, as I still love it and am confident that I can put my energy and 18 years of experience to good use. While I no longer intend to manage others’ money, I’m exploring a number of ideas, such as:

1) Unearthing a few great investment opportunities each year, in which I can invest personally as well as share with a few others;
2) Serving on corporate boards;
3) Doing consulting in areas in which I have expertise such as capital allocation, strategy, and activist investing; and
4) Teaching and mentoring young value investors via writings, videos and seminars.

I would welcome your advice and suggestions, so please don’t hesitate to email me at WTilson@kasecapital.com or call me at (646) 258-0687.

Sincerely yours,

Whitney

Eric Mindich's $12 Billion Eton Park Is Returning Capital To Investors: Here Are His Biggest Holdings

Once upon a time Eric Mindich was best known for being the Goldman "wunderkind" - the youngest-ever Goldman partner, who parlayed his reputation into the 2004 launch of his hedge fund Eton Park. Unfortunately for Mindich, after over a decade of running other people"s money, the hedge fund apocalypse caught up with the ex-youngest partner, and after a year of losses, which led to an exodus of investors from Mindich’s $12 billion Eton Park Capital Management, which fell about 11% last year, the hedge fund is now said to be returning capital to investors.

According to Bloomberg, Eric Mindich, whose hedge fund startup in 2004 was among the largest in the industry, is returning client capital after 13 years.

Mindich, 49, plans to return all outside funds in New York-based Eton Park Capital Management because he doesn’t believe he’ll be able to run a global, multi-disciplinary investment firm under current conditions, according to a person with knowledge of the matter.

Readers may recall Eric Mindich for two other notable accomplishments: as we first reported back in September 2009, Mindich was none other than the president of the infamous Plunge Protection Team, as discussed in  "What Is Goldman Alum Eric Mindich"s Role As Chair Of The Asset Managers" Committee Of The President"s Working Group?"

The other notable event involving Mindich was the 2011 report that he was among the hedge fund managers getting direct inside information about the fate of Fannie and Freddie ahead of their bailout, from none other than Hank Paulson, as we discussed in "Hank Paulson Tipped Off The Goldman-Led "Plunge Protection Team" About Fannie Bankruptcy 7 Weeks In Advance."

Paulson... went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” -- a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets."

The gathering comprised some of Wall Street"s most storied investors. Mindich, a former chief strategy officer of New York- based Goldman Sachs, started Eton Park in 2004 with $3.5 billion, at the time one of the biggest hedge-fund launches ever. [Dinakar] Singh, a former head of Goldman"s proprietary-trading desk, also began his fund in 2004, in partnership with private- equity firm Texas Pacific Group Ltd. Lone Pine"s [Stephen] Mandel worked as a retail analyst at Goldman before joining Julian Robertson"s Tiger Management LLC, one of the most successful hedge funds of the 1980s and 1990s. He started his own firm in 1997. [Daniel] Och was co-head of U.S. equity trading at Goldman before founding Och-Ziff in 1994. The publicly listed firm managed $28.9 billion in November. One other Goldman Sachs alumnus was at the meeting: Frank Brosens, founder and principal of Taconic Capital Advisors LP, who worked at Goldman as an arbitrageur and who was a protege of Robert Rubin, who went on to become Treasury secretary.

In other words the point of the meeting was nothing short of the former Goldman CEO telling all his former Goldman colleagues just what he was planning on doing in his capacity as Treasury Secretary.

In any case, while we await details as to how this formerly high-flying Icarus crashed so low, here are his biggest holdings:

it is worth noting that NXP, MSFT, and BAC - some of Eton Park"s biggest holdings, tumbled on Tuesday, and one wonders if Mindich was the big redemption mentioned earlier this week by Mohamed El-Erian.