The entrance to the offices of Jabre Capital Partners. (Photographer: Pierre Virot/Bloomberg News)

Another Hedge Fund Veteran Is Quitting a Brutal Market

(Bloomberg) -- Philippe Jabre is returning money to investors after an “especially challenging” year, adding to the swelling list of hedge-fund veterans giving up on an industry where money-making opportunities have dwindled.

Geneva-based Jabre Capital Partners SA is returning client money in the three funds personally managed by Jabre, said Mark Cecil, one of the firm’s founding partners. The remaining two funds, one focused on emerging markets and the other on European credit, will keep operating with outside money, he said.

This year has been an exceptionally tough one for hedge funds as asset prices tanked and volatility -- usually a friend for money managers seeking benchmark-beating returns -- returned after a period of calm. Wide price swings, a waning bull market and rising interest rates were seen as the elixir the $3.2 trillion industry needed to overcome years of subpar performance. Instead, many firms got pummeled in last month’s market swoon and are headed for their worst year since 2011.

Jabre, the founder and chief investment officer of his namesake firm, is selling positions in a “disciplined manner” and intends to return most of the proceeds by February, he wrote in an investor newsletter dated Dec. 12 and obtained by Bloomberg News. Jabre Capital managed about $1.2 billion of assets as of April with more than 40 employees. Cecil declined to comment on the firm’s current size.

“In previous periods, weakness created opportunities but as we survey the outlook for 2019, we are concerned that we don’t see those opportunities,” Jabre wrote in the letter. “Both the political and economic outlooks remain confused and without clear direction.”

Another Hedge Fund Veteran Is Quitting a Brutal Market

Some of the biggest names have been caught up in the melee.

Jon Jacobson’s $12.1 billion Highfields Capital Management LLC is returning client money after two decades, joining other well-known operators including Richard Perry’s namesake company, Eric Mindich’s Eton Park Capital Management LP and John Griffin’s Blue Ridge Capital LLC, which have all exited the industry over the past two years. Leon Cooperman, meanwhile, plans to convert his firm into a family office at the end of the year.

An estimated 174 hedge funds were liquidated in the third quarter globally, outstripping new starts by 30, data from Hedge Fund Research Inc. show.

Another Hedge Fund Veteran Is Quitting a Brutal Market

It’s not the first time the industry has been tripped up by volatility. In 2011, as Europe’s sovereign debt crisis roiled global markets, funds industry-wide lost an average 5.3 percent, according to data compiled by Hedge Fund Research Inc. A slew of managers were forced to close their businesses.

Philippe Jabre, a Lebanese Christian educated at French schools in Beirut, got his start at BAII in the 1980s, managing oil money for Middle Eastern countries. He later moved to GLG Partners LP, formed as a hedge fund unit within Lehman Brothers Holdings Inc. in 1995 by ex-Goldman Sachs Group Inc. bankers Noam Gottesman, Pierre LaGrange and Jonathan Green -- the G, L and G in GLG Partners.

Skiing, Cigars

In 2003, while still at GLG Partners, Jabre unleashed one of the biggest market abuse cases in British history at the time when he shorted the shares of Sumitomo Mitsui Financial Group Inc. on information the bank was planning to sell convertible bonds.

The U.K. Financial Services Authority accused Jabre, an extreme skier with a taste for Havana cigars and high-stakes bets, of trading on inside information and fined him 750,000 pounds ($946,500), a record then. The regulator stopped short of calling his actions intentional, a ruling that might have prompted the FSA to ban Jabre from working in the City of London.

Jabre eventually quit GLG Partners, paid the fine and moved to Switzerland. In 2006, he starting building Jabre Capital.

In his letter to investors, Jabre, now in his late 50s, also said that “financial markets have significantly evolved over the last decade driven by new technologies and the market itself is becoming more difficult to anticipate as traditional participants are imperceptibly replaced by computerized models.”

A Sicav (or open-ended investment vehicle that’s popular in Western Europe and similar to a mutual fund) version of Jabre Capital’s global balanced fund has lost 42 percent this year through Dec. 11, Bloomberg data show. A euro-denominated, Luxembourg-incorporated version of its convertible bonds fund is down 18 percent.

“This has not been an easy decision especially given the extraordinary loyalty and partnership that I have enjoyed with our clients,” Jabre said. “Their support and confidence have been the backbone of my passion to invest.”

©2018 Bloomberg L.P.