October 3, 2018 / 9:58 PM / 2 years ago

Hedge fund Highfields to shut down, founder says in client letter

BOSTON (Reuters) - Hedge fund Highfields Capital Management is shutting down amid a period of lackluster returns and as its founder said he needs a change after two decades of managing money for prominent clients including Harvard University.

FILE PHOTO: Jonathon Jacobson, chief investment officer of Highfields Capital Management, speaks at the Sohn Investment Conference in New York, May 8, 2013. REUTERS/Brendan McDermid

Jonathon Jacobson told investors on Wednesday that he plans to convert the roughly $12 billion Boston-based firm into a family office and acknowledged that results in the “last few years” have fallen short of his expectations.

Highfields has lost a little more than 1 percent this year and was up just slightly in 2017. Longer term, the firm returned an average 10.2 percent a year after fees since opening for business in 1998, compared with a 7.4 percent Standard & Poor’s 500 gain.

The firm will be returning roughly $10 billion to clients and Jacobson said he will liquidate the portfolio “methodically and opportunistically” instead of trying to meet any arbitrary, near-term deadline with a fire-sale.

The move marks one of the biggest hedge fund closings in recent months coming as industry returns have been disappointing and clients chafed at paying hedge funds’ traditionally high fees. Last year Eric Mindich shut down Eton Park and in 2016 Richard Perry liquidated Perry Capital.

The Wall Street Journal first reported the news.

“After three-and-a-half decades of sitting in front of a screen, I realized I am ready for a change,” Jacobson, 57, wrote in a letter to clients which was seen by Reuters.

Jacobson said he has been mulling the move for some time. “As I reflected on my goals for the next few years and the next chapter of my life, the tell was that I simply could not pull the trigger on making a multi-year commitment to a few potential key hires.” He said he has no definite future plans but expects to help employees who want to set up their own firms.

In an industry full of high-profile investors, Jacobson largely stayed out of the limelight, attending few industry conferences and strolling largely unnoticed near his office.

Jacobson got his start investing for Harvard University’s multi-billion-dollar endowment, and co-founded Highfields with Richard Grubman, who left in 2010.

The pair earned fame and a big payoff by betting against Enron months before its 2001 bankruptcy. Highfields also earned strong returns on a bet on the credit markets in 2009. In two decades Highfields lost money in only two years; 2002 and 2008 during the financial crisis.

Reporting by Svea Herbst-Bayliss; Editing by James Dalgleish

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