May 12, 2017 / 9:27 PM / 2 years ago

Hedge fund Passport nurses fresh losses as assets shrink

BOSTON (Reuters) - Hedge fund Passport Capital, which once grabbed headlines with triple digit returns, has been hit with fresh losses and its assets continue to shrink, the firm’s founder told investors in a letter seen by Reuters on Friday.

John Burbank, founder & chief investment officer of Passport Capital, speaks at a panel discussion at the SALT conference in Las Vegas May 15, 2014. REUTERS/Rick Wilking

Passport’s Global Strategy fund lost 7.5 percent in the first four months of 2017, following on the heels of last year’s 17.4 percent loss. The broader S&P 500 stock index climbed 12 percent in 2016 and gained 7.2 percent in the first four months of 2017.

Assets at the San Francisco-based firm contracted to $2 billion at the end of April, half of what it had managed only a few years earlier. Global Strategy now has $751 million in assets.

A Passport spokesman declined to comment.

The decline in assets and sluggish performance underscore tough times across the hedge fund industry, with the average fund gaining only about 3 percent so far this year. More hedge funds shut down last year than at any time since the financial crisis.

Passport’s assets shrank by $387 million in the first three months of the year, Burbank told investors in the letter. He did not say how much money may have left in April. The Global Strategy fund had $187 million in outflows during the first quarter.

Burbank has made big bets on Saudi stocks, including National Commercial Bank SJSC as well as Alinma Bank. He has also been bullish on Chinese consumer and internet company Alibaba Group and he said he is sticking with them.

Ten years ago, Passport was an industry darling when the Global Strategy gained an eye-popping 219 percent. It suffered a 50.9 percent loss the following year, however, and this year’s declines are just the latest in a string of setbacks for Burbank.

Tim Garry, who co-managed Passport’s long-short equity fund, left the firm after an eight-year stay last year and Burbank has since decided to shut it down.

Garry had also led Passport’s Portfolio Construction, Risk and Quantitative Strategies. He is currently launching his own fund, Pelorus Jack Capital, which is also based in San Francisco.

After years of being a featured speaker at the Skybridge Alternatives Conference, known as SALT, Burbank is not scheduled to attend this year’s event. The SkyBridge Multi-Adviser Hedge Fund Portfolios LLC, which long had money with Passport, no longer invests, a recently regulatory filing shows.

Reporting by Svea Herbst-Bayliss; Editing by Tom Brown

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