Hound Partners has continued to shed assets.
The Tiger Seed recently disclosed in its annual ADV filing it managed $1.95 billion at year-end.
This is down about 9.4 percent from the $2.156 billion it reported a year ago, despite Hound launching its new Variable Beta Funds in October.
Hound’s assets under management had also declined in 2019, falling from $3 billion at the end of 2018, even as its long-short fund gained 22.5 percent that year, according to an investor.
Hound managed $4.6 billion at the end of 2017, according to a Hound client letter obtained earlier by Institutional Investor.
[II Deep Dive: Hound Partners Assets Shrink]
Investors apparently are continuing to punish the firm for what is now a six-year string of mostly disappointing results — and last year was no different.
Hound’s long-short fund may have posted a strong gain in the low teens in the fourth quarter. However, it only finished the year up 12 percent, according to an investor.
As a result, it once again way underperformed the S&P 500, which was up more than 18 percent last year including dividends reinvested.
Hound also lagged many of the other Tiger descendants, whose gains were multiples of Hound’s results.
Assuming that Hound’s two long-only funds were in the black in 2020, the asset decline last year could reflect another round of redemptions.
Hound, headed by Jonathan Auerbach and seeded by Julian Robertson in 2004, did not return a call seeking comment.
Hound appears to have sharply altered its strategy in the past few quarters. Or so it seems at first glance.
The firm, which for years ran a fairly concentrated portfolio, held 124 different U.S. common stocks at year-end, and nearly 100 the previous quarter, according to its recent 13F filings.
This compares with around 50 at the end of the second quarter, which was a larger number than prior periods.
For example, Hound held just 36 different common stocks in the first quarter of 2020 and just 27 at the end of 2019, more in line with the firm’s strategy until recently.
The recent surge may be attributed to a number of very small positions in special purpose acquisition companies, or SPACs, which were initiated in the third and fourth quarters.
Otherwise, Hound’s five largest U.S. long bets at year-end still accounted for nearly 30 percent of the portfolio, and the top ten accounted for almost half of its U.S. common stock assets, according to the fourth quarter 13F filing.
The filings don’t show which stocks Hound was shorting, an important part of its strategy.
This said, in the fourth quarter Hound either reduced or liquidated all of its largest holdings from the previous quarter. For example, it fully exited airplane lessor Aercap Holdings. The stock sank more than 16 percent in January.
Hound’s largest position remained Farfetch Ltd., a British-Portuguese online retailer of luxury fashion, even though it cut its stake by 55 percent in the fourth quarter.
Tank barge operator Kirby Corp., financial management and human capital management software maker Workday, social media giant Facebook, and aerospace component producer TransDigm Group also remained top holdings, even though Hound trimmed each of those positions.
On the other hand, Hound quadrupled its stake in HCA Healthcare in the fourth quarter, making the health care facility operator its the second largest U.S. long position.
Wix.com became Hound’s seventh largest long after the hedge fund firm initiated a position in the Israeli cloud-based software company in the fourth quarter.
The Variable Beta Funds, meanwhile, have a short-biased strategy. They seek to generate capital appreciation and outperformance compared with market indices through short-selling, according to the ADV.
The core portfolio consists of about 30 to 40 short positions, which typically “mirror” the short positions held in the long-short funds. It also may have long exposure through futures contracts, exchange-traded funds or other instruments related to the S&P 500 Index and Russell 2000 Index, the firm elaborated in the filing.
