Key Takeaways
- • Passport Capital, founded by John Burbank III in 2000, is shutting down its long-short equity fund, which managed approximately $833 million in assets—representing nearly one-third of the firm's total assets under management.
- • The fund closure reflects broader performance headwinds: the long-short equity strategy declined 2.09% through February 2017 and 11.77% in 2016, driving investor redemptions and asset contraction across the firm.
- • Passport's total assets have contracted sharply, declining from $3.3 billion in mid-2016 to approximately $2.6 billion as of January 31, 2017, signaling material outflows despite the firm's historical success during the 2007 subprime crisis.
- • The firm is experiencing significant staff turnover, with analysts seeking new positions for several months, compounding operational challenges alongside underperformance and redemption pressure.
- • Passport's flagship Global Strategy fund, which returned 219% to investors in 2007 during the financial crisis, remains operational despite the closure of the long-short equity strategy.
Summary
San Francisco-based Passport Capital is closing its long-short equity fund, marking a significant contraction for the multi-billion-dollar hedge fund firm founded by John Burbank III in 2000. The shuttered fund managed approximately $833 million, representing nearly one-third of Passport's total assets under management. Sources familiar with the matter confirmed the closure, though a firm spokesperson at external PR agency ASC Advisors declined to comment on the timing of investor distributions.
The fund's closure reflects a deteriorating performance trajectory and mounting investor redemptions. Through February 2017, the long-short equity fund declined 2.09%, following a steeper 11.77% decline in 2016. These underperformance metrics have accelerated broader asset outflows from the firm. Passport's total assets have contracted substantially, falling from $3.3 billion in mid-2016 to approximately $2.6 billion as of January 31, 2017—a 7% year-over-year decline and further compression from mid-year 2016 levels, according to regulatory filings and HFI Billion Dollar Club rankings.
The contraction is compounded by significant staff attrition. Institutional Investor's Alpha reported in April 2017 that the firm has experienced heavy staff turnover, with multiple analysts actively seeking employment elsewhere for several months. This talent exodus signals broader operational stress within the organization.
The closure is notable given Burbank's prominent track record during the 2008 financial crisis. His flagship Passport Global Strategy fund generated a 219% return in 2007 by successfully shorting the subprime mortgage crisis. That fund remains operational despite the long-short equity strategy's shutdown. The decision to close the long-short equity fund while preserving the Global Strategy suggests a strategic recalibration toward the firm's better-performing assets amid persistent redemption pressure and underperformance.
The fund's closure reflects a deteriorating performance trajectory and mounting investor redemptions. Through February 2017, the long-short equity fund declined 2.09%, following a steeper 11.77% decline in 2016. These underperformance metrics have accelerated broader asset outflows from the firm. Passport's total assets have contracted substantially, falling from $3.3 billion in mid-2016 to approximately $2.6 billion as of January 31, 2017—a 7% year-over-year decline and further compression from mid-year 2016 levels, according to regulatory filings and HFI Billion Dollar Club rankings.
The contraction is compounded by significant staff attrition. Institutional Investor's Alpha reported in April 2017 that the firm has experienced heavy staff turnover, with multiple analysts actively seeking employment elsewhere for several months. This talent exodus signals broader operational stress within the organization.
The closure is notable given Burbank's prominent track record during the 2008 financial crisis. His flagship Passport Global Strategy fund generated a 219% return in 2007 by successfully shorting the subprime mortgage crisis. That fund remains operational despite the long-short equity strategy's shutdown. The decision to close the long-short equity fund while preserving the Global Strategy suggests a strategic recalibration toward the firm's better-performing assets amid persistent redemption pressure and underperformance.
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.