Soroban Shuts $4 Billion Hedge Fund to Concentrate Portfolio

(Bloomberg) -- Eric Mandelblatt, who co-founded Soroban Capital Partners eight years ago, is closing his oldest fund to focus on a more concentrated portfolio of stocks, cutting assets under management by almost half.

Mandelblatt also told investors in a letter Monday that Gaurav Kapadia, Soroban’s co-founder and co-managing partner, is leaving the firm to start his own family office, where he will invest in both public and private companies. Mandelblatt said he would invest with Kapadia if he decides to start his own hedge fund.

Other hedge fund managers have been closing funds amid poor performance, but Mandelblatt and Kapadia have produced annualized 13 percent returns in the $4.1 billion Soroban Master Fund since inception, or about equal to the S&P 500 Index. The pair started New York-based Soroban after leaving TPG-Axon Capital Management.

“While we will be sacrificing the economic benefits to Soroban associated with greater assets under management, our bet is that these changes will facilitate better investment returns over the long run,” Mandelblatt wrote in the letter. “This is a sensible trade-off for our firm as we, partners and employees, are collectively the largest investor today.”

The Opportunities Fund, which oversees almost $6 billion, will have 10 to 20 positions, according to the letter, with 10 to 15 stocks Mandelblatt expects to rise and up to 10 he expects to fall. Currently the firm manages about 50 positions.

As part of the changes, Ashish Doshi, Brent Greenfield, Mark Rogers and Albert Satija will join Mandelblatt in the investment leadership team of the firm.

Investors in the Master Fund will get at least three-quarters of their money back by June 30, with the remainder coming no later than year-end. Those clients will be allowed to move an aggregate $750 million into the Opportunities Fund on July 1.

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