Hedge fund firm Valiant Capital Partners has continued its hot streak, producing double-digit gains in the face of a market meltdown that officially pushed stocks into bear market territory this week.
The San Francisco firm headed by Chris Hansen notified investors on Thursday that it is up 25 percent on a gross basis through March 11, according to a one-page letter sent to clients.
It was also up on Thursday, when the Dow Jones Industrial Average and the S&P 500 stock index each plunged by about 10 percent, according to an investor.
The firm has heavily benefitted this year from its short book, according to an investor.
“Protecting capital in downturns has always been a core part of our strategy, and once again it is nice to see it pay off when it matters the most,” Hansen states in a one-page update letter sent to clients Thursday and obtained by Institutional Investor.
Hansen reminded clients that the firm always aims to be well hedged. That said, he stressed that the firm began trying to further insulate the portfolio from severe risks it believed were coming “in late January and early February,” several weeks before the sharp market selloff began.
“These moves appear to have paid off in a big way for the fund,” Hansen proclaimed. He said he will provide more details in the first-quarter letter.
Last year, Valiant returned just 9.1 percent, less than one-third the return generated by the S&P 500 and other stock indexes.
II earlier reported that as of the end of January Valiant had sharply cut its net long exposure to below 30 percent from nearly 49 percent at the end of December, according to its recent statistical reports obtained by II. In doing so, it raised its short exposure from 83 percent to about 98 percent and slightly trimmed its long book.
II also earlier reported that Valiant Capital Partners Onshore rose about 13.97 percent in February, boosting its gain for the year at the time to 19.51 percent, according to the hedge fund’s fourth-quarter report to clients, seen by Institutional Investor.
Valiant benefitted in large part from its overall conservative positioning and its short book, according to an investor. The firm’s main fund has been up in more than 70 percent of the months the Standard & Poor’s 500 stock index has been down, according to the investor.
Hansen is a so-called Tiger Grandcub because he worked for former Tiger Management veteran John Griffin’s Blue Ridge Capital.
Hansen also said in the Thursday letter that since Monday, March 9, the entire firm is working from home “with no issues so far.”
Valiant’s strong performance this year in the face of the bear market underscores the experience of many long-short funds that lost large sums on their short books last year but are seeing a sharp reversal this year.
A manager at another long-short fund that is making money this year emphasized in an email message: “Those who have a real short book (as opposed to shorting ETFs and indexes) are doing very well. This is a hedge fund’s dream because the combination of volatility and significant long/short spreads across sectors is creating a lot of opportunities to actually make money or generate a lot of alpha relatively.”
Added another manager in an email message: “I think this month will make people remember the value of shorting and long-short strategies in general.”
An earlier version of this story misstated Hansen’s former place of employment. II regrets the error.
