Key Takeaways
- • Pelham Capital's flagship long-short equity fund declined 14.4% in October 2018, extending year-to-date losses to approximately 12%, according to people familiar with the matter.
- • Assets under management have collapsed from $4.5 billion in October 2020 to approximately $1 billion, representing a loss of more than three-quarters of assets in three years due to sustained underperformance and investor redemptions.
- • The fund posted negative returns of 11.8% in 2021 and 29% in 2022, with only a 5% recovery year-to-date, leaving it significantly below its high-water mark and unable to collect performance fees.
- • Pelham's struggles reflect broader sector headwinds affecting long-short equity hedge funds, which have underperformed traditional equity indices throughout the post-2008 bull market; this year the strategy is up 5.58% versus 12.5% for the S&P 500.
- • Founded by former Lansdowne Partners manager Ross Turner and backed by Goldman Sachs's Petershill fund, Pelham exemplifies the competitive pressure facing equity-focused hedge funds, with peers including Adelphi Capital and Sloane Robinson closing operations in recent years.
Summary
Pelham Capital, once a flagship London-based equity hedge fund, experienced a severe October 2018 drawdown of 14.4% in its flagship long-short equity fund, according to sources with direct knowledge of the fund's performance. This monthly loss extended year-to-date declines to approximately 12%, illustrating persistent challenges for the firm in a market environment that has proven increasingly hostile to its core investment strategy.
The fund's deteriorating performance reflects a multi-year pattern of underperformance. The flagship fund posted losses of 11.8% in 2021 and declined 29% in 2022, with a modest 5% recovery so far in 2018, leaving it well below its high-water mark—the threshold at which the firm can resume charging performance fees. This extended period of underperformance has triggered significant investor redemptions. Assets under management have contracted dramatically from $4.5 billion in October 2020 to approximately $1 billion at present, representing a loss of more than three-quarters of assets in just three years.
Pelham's difficulties are emblematic of broader structural challenges facing long-short equity hedge funds. The strategy, which bets on individual stock price movements both up and down, has struggled to deliver competitive returns relative to traditional equity indices, particularly during the extended bull market following the 2008-09 financial crisis. This year, a broad index of long-short equity funds is up 5.58% compared to 12.5% for the S&P 500 index, demonstrating the persistent performance gap. Last year's market downturn provided only marginal outperformance, with long-short equity funds declining 13.5% versus 20.5% for the broader equity market.
Founded by Ross Turner, a former Lansdowne Partners manager, Pelham is backed by Petershill, Goldman Sachs's publicly listed hedge fund platform. The firm's struggles are not isolated; peer firms including Adelphi Capital and Sloane Robinson have closed operations in recent years, while established competitors such as Lansdowne and Egerton Capital have significantly reduced their hedge fund businesses. As one Pelham investor noted, "Assets leave when performance is bad. Clients lose patience," capturing the fundamental challenge facing the firm as it seeks to stem further redemptions and demonstrate a path to recovery.
The fund's deteriorating performance reflects a multi-year pattern of underperformance. The flagship fund posted losses of 11.8% in 2021 and declined 29% in 2022, with a modest 5% recovery so far in 2018, leaving it well below its high-water mark—the threshold at which the firm can resume charging performance fees. This extended period of underperformance has triggered significant investor redemptions. Assets under management have contracted dramatically from $4.5 billion in October 2020 to approximately $1 billion at present, representing a loss of more than three-quarters of assets in just three years.
Pelham's difficulties are emblematic of broader structural challenges facing long-short equity hedge funds. The strategy, which bets on individual stock price movements both up and down, has struggled to deliver competitive returns relative to traditional equity indices, particularly during the extended bull market following the 2008-09 financial crisis. This year, a broad index of long-short equity funds is up 5.58% compared to 12.5% for the S&P 500 index, demonstrating the persistent performance gap. Last year's market downturn provided only marginal outperformance, with long-short equity funds declining 13.5% versus 20.5% for the broader equity market.
Founded by Ross Turner, a former Lansdowne Partners manager, Pelham is backed by Petershill, Goldman Sachs's publicly listed hedge fund platform. The firm's struggles are not isolated; peer firms including Adelphi Capital and Sloane Robinson have closed operations in recent years, while established competitors such as Lansdowne and Egerton Capital have significantly reduced their hedge fund businesses. As one Pelham investor noted, "Assets leave when performance is bad. Clients lose patience," capturing the fundamental challenge facing the firm as it seeks to stem further redemptions and demonstrate a path to recovery.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.