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Passport to Shut Global Hedge Fund After `Unacceptable' Loss

(Bloomberg) -- John Burbank’s Passport Capital, which shot to fame for its lucrative bet against subprime housing ahead of the global financial crisis, will shutter its flagship hedge fund after returns slumped.

The fund’s “returns over the past two years are unacceptable and cause me to rethink how to manage money in this environment,” Burbank wrote in a Dec. 11 letter to investors, the contents of which were first reported in the Wall Street Journal. Passport Capital will continue to focus on its Special Opportunities Fund and the Saudi share class, according to the letter.

“You will not hear about Passport shutting down -- there is too much opportunity available to do that,” Burbank wrote, adding that the firm may announce a new area of investment in the near future.

Burbank has been investing in cryptocurrencies and is actively exploring new opportunities in that area, according to a person with knowledge of the matter.

Hedge fund liquidations worldwide outpaced starts for seven consecutive quarters through June, according to data from Hedge Fund Research Inc., which estimated that 481 funds were liquidated in the first half of this year, compared with 369 new launches. As investors balked at their mediocre returns and high fees, more than half of funds globally lost assets in September and October, eVestment data showed.

Burbank founded Passport in 2000 and is best known for his big bet on a tumble in subprime mortgages in 2006. His fund made 220 percent the following year. Passport Capital’s assets hit a peak of about $5 billion before a double-digit loss last year and more losses in 2017, the Wall Street Journal said, citing unidentified investors.

Passport Capital’s assets declined to $2.4 billion in April, then plummeted further to $900 million amid client withdrawals and after it wound down its Long-Short Strategy fund after an “incredibly disappointing 2016,” Bloomberg reported earlier this year.

Hedge-Fund Swagger Sinks Along With Profits and Fees: QuickTake

Burbank joins other well-known managers to shut hedge funds. Neil Chriss is closing his $2.2 billion hedge fund firm Hutchin Hill Capital and returning investors’ money. Eric Mindich’s Eton Park, Hugh Hendry’s Eclectica Fund and Whitney Tilson’s Kase Capital Management have also shut down.

©2017 Bloomberg L.P.

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