'Reporting sustained underperformance to you was making me miserable': Whitney Tilson is closing his hedge fund
In an excerpt of a letter sent to clients, Tilson said that underperformance had been a reason to close his firm Kase Capital.
"If I were managing only my own money, the fund's recent results wouldn't bother me quite so much," Tilson wrote. "But investing and running a money management business are two very different things, and reporting sustained underperformance to you was making me miserable."Kase, which managed about $50 million, had lost about 8% this year, according to Dow Jones, which earlier reported the news.
In an emailed newsletter, Tilson said that he wasn't yet sure what he would do next, but that he expected to continue in the investment field. Among options he floated:
- "Unearthing a few great investment opportunities each year, in which I can invest personally as well as share with a few others;
- Serving on corporate boards;
- Doing consulting in areas in which I have expertise such as capital allocation, strategy, and activist investing; and
- Teaching and mentoring young value investors via writings, videos and seminars."
Here are excerpts from the letter Tilson sent to investors:
I wanted to follow up on the conversations I've had with each of you recently regarding my decision to close the fund and return your capital.
Most importantly, I'd like to reiterate my tremendous gratitude for your patience and confidence in me over the years. You gave me the time to try to improve the fund's performance, and I deeply regret that I was unable to do so.If I were managing only my own money, the fund's recent results wouldn't bother me quite so much. But investing and running a money management business are two very different things, and reporting sustained underperformance to you was making me miserable.
I would have liked nothing better than to have rewarded you for standing by me during these difficult times by ending on a high note, but I ultimately concluded that I couldn't in good conscience continue to manage your money unless I had a high degree of confidence that I could turn things around within a reasonable time frame.
Over the nearly two decades that I have managed money professionally, I have endured other periods of underperformance. During those times, however, I was certain that the losses were temporary because our portfolio was filled with cheap stocks that would quickly rebound.
Alas, I don't have that feeling today. Historically, I have invested in high-quality, safe stocks at good prices as well as lower-quality ones at distressed prices. Given the high prices and complacency that currently prevail in the market, however, my favorite safe stocks (like Berkshire Hathaway and Mondelez) don't feel cheap, and my favorite cheap stocks (like Hertz and Spirit Airlines) don't feel safe. Hence, my decision to shut down.
It has been a tremendous privilege to manage your capital, and I want to express my deepest gratitude for your support and friendship over the years. It means the world to me.