Highfields Capital Returning Money to Investors After 20 Years

(Bloomberg) -- Investor Jon Jacobson is winding down his $12.1 billion hedge fund, joining other veteran managers who have exited the business as returns have faltered.

Jacobson, who started Highfields Capital Management in 1998, will begin returning client money at the end of year, according to a letter to investors Wednesday.

"The simple reality is that, after three-and-a-half decades of sitting in front of a screen, I realized I am ready for a change," Jacobson, 57, wrote in the two-page letter.

His stock hedge fund has struggled in recent years along with many of its peers in what he called a “very treacherous investment environment.” The fund was down about 1 percent this year and was up only slightly in 2017. Since inception, it posted an annualized 10.2 percent return, outpacing the S&P 500 Index, and had only two losing years, 2002 and 2008.

Jacobson joins a growing list of big name managers who have left the industry in the past two years, including Richard Perry, Eric Mindich’s Eton Park Capital Management, John Griffin’s Blue Ridge Capital and Neil Chriss’ hedge fund. Leon Cooperman plans to convert his firm into a family office at the end of the year.

Wind-Down Plan

While other hedge funds have seen their assets shrink over the past several years, Boston-based Highfields has seen its capital hover around $12.5 billion since 2014. Redemptions throughout this year as a percentage of capital were in the single digits, according to a person familiar with the firm.

Clients will get about half their money back at the end of the year, and most of the rest by mid-2019. There may be a side-pocket of up to 10 percent with illiquid securities or special situations, he wrote. The firm won’t charge management fees after the end of this year.

Before starting Highfields, Jacobson spent eight years at Harvard Management Co. At the end of his time there he was the top performing and most highly paid portfolio manager. He started Highfields with $1.5 billion, a third of which came from Harvard.

About $2.7 billion of Highfields assets belong to Jacobson and other insiders. He will start a family office to manage his wealth, but he doesn’t expect to spend his remaining days trading his fortune.

"I have no idea what the next act will entail," Jacobson wrote toward the end of his letter. "For now, though, my plan is to play hard until the final whistle," maximizing value on the remaining investments and helping colleagues find work elsewhere.

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