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Tags: Whitney Tilson | hedge fund | Kase | investing

WSJ: Whitney Tilson Plans to Shut Down Hedge Fund

WSJ: Whitney Tilson Plans to Shut Down Hedge Fund
(YouTube)

By    |   Thursday, 28 September 2017 11:50 AM EDT

Whitney Tilson, the well-known investment manager who makes frequent appearances on TV and at conferences, is closing his hedge fund.

Tilson shared his decision with clients on Sunday, The Wall Street Journal reported, citing people close to the matter. His Kase Capital Management LLC has lost about 8 percent this year, compared with a gain of 13.7 percent for the S&P 500 including dividends. Tilson manages about $50 million, down from a peak of $180 million in 2010.

He’s the latest high-profile investor to close down his fund amid poor performance for actively managed funds. In the past few months, investor Eric Mindich closed the $7 billion Eton Park Capital Management LP, billionaire Richard Perry wound down his hedge-fund firm and Hugh Hendry shuttered his flagship fund in London.

Sen. Elizabeth Warren last year criticized Tilson for voicing public support for some of President Donald Trump’s cabinet and other appointments from Wall Street, even though 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, but later apologized.

Tilson was featured on "60 Minutes" for his short sales of stock in Lumber Liquidators, the hardwood flooring company whose Chinese-made products were alleged to contain dangerous levels of toxic chemicals. 

Hedge funds have had difficulty beating the performance of the broader market, which has gotten more expensive as central banks like the Bank of Japan, European Central Bank and Bank of Switzerland bid up the price of financial assets as part of their effort to pump more money into the global financial system.

The Federal Reserve has raised interest rates in the past two years at a gradual pace while being mindful of investor reactions. During the presidential election, Republican Donald Trump accused the central bank of pushing down interest rates in order to support President Barack Obama's sluggish recovery. 

Corporations also have taken on record levels of debt to buy back shares, regardless of the valuation.

Any fund that holds cash or hedges risk is missing the stock rally, which has grown more dependent on a shrinking number of stocks such as tech leaders Alphabet, Amazon, Apple, Facebook and Netflix.

“Also hurting these investors has been a broader shift to low-cost passive investments and other types of funds,” according to the WSJ. “All types of institutions are now increasingly questioning the value of paying up to be in a hedge fund.”

Quant funds, which use computer models to automate trading instead of fundamental research also has hurt investors like Tilson. Value investors have underperformed as more expensive technology stocks have led the market.

Tilson is expected to manage his own money and focus on other business endeavors, a person close to the matter told the WSJ.

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StreetTalk
Whitney Tilson, the well-known investment manager who makes frequent appearances on TV and at conferences, is closing his hedge fund. Tilson shared his decision with clients on Sunday, The Wall Street Journal reported, citing people close to the matter.
Whitney Tilson, hedge fund, Kase, investing
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2017-50-28
Thursday, 28 September 2017 11:50 AM
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