| Dinakar Singh, TPG-Axon (Bloomberg) |
Dinakar Singh is the latest example of a one-time Goldman Sachs honcho to have stumbled as a hedge fund manager.
Singh, who co-founded TPG-Axon Capital Management in 2005 with private equity firm Texas Pacific Group, was managing as much as $13 billion at the end of 2007, having nearly doubled his firm’s assets from the previous year, when it was running $7.2 billion. Today, assets are down to $1.6 billion. A major reason: TPG-Axon is well on its way to posting its third-straight losing year.
As of the end of September, its long-short hedge fund, TPG-Axon Partners, had fallen 22.60 percent, making it one of the worst-performing hedge funds in 2016. It was down more than 24 percent through August. The fund declined by 3.1 percent last year and lost 5.7 percent in 2014.
Singh previously had been a partner at Goldman Sachs, serving as a co-head of the principal strategies department until early 2004. He earlier had spent four years in Hong Kong, establishing the firm’s proprietary investing effort in Asia.
Alpha has previously reported on the setbacks suffered by at least four other Goldman Sachs alumni who went on to run prominent hedge fund firms. Richard Perry’s Perry Capital recently announced it is shutting down its flagship hedge funds. Dan Och’s Och-Ziff Capital Management Group recently settled federal bribery charges and has faced billions of dollars of redemptions. Leon Cooperman and his New York firm Omega Advisors were accused of trading with insider information and other securities transgressions by the Securities and Exchange Commission. Edward Lampert’s ESL Investments has lost virtually all of its outside investors due to protracted losses from its ill-fated investment in Sears Holdings Corp.
Singh takes an aggressive approach to investing globally.
He typically runs a gross exposure that straddles 300 percent. However, TPG-Axon’s net exposure is usually very low. Several years ago the net exposure ranged between 15 percent and 20 percent. At the end of the first quarter of 2015 — the last period for which Alpha has detailed information on the firm — it was actually net short 3 percent.
At the time, a little more than half the gross exposure was invested in the Americas, followed by Asia and Europe. At the end of the second quarter of this year, TPG-Axon had a little less than $700 million in U.S. long equities. This was down from $911 million the previous quarter, according to regulatory filings.
Singh also likes to run a very concentrated portfolio. The $700 million was spread over just 11 different stocks. What’s more, the four largest positions accounted for about two thirds of the U.S. long portfolio.
One quarter of the firm’s second-quarter assets was invested in drug maker Allergan alone after TPG-Axon lifted the position by nearly 40 percent from the previous three-month period. The stock, however, was down 26 percent for the year through September, contributing to the losses at the hedge fund.
Adeptus Health, the firm’s third-largest long position, lost about 21 percent during the first nine months of the year. The company operates about 80 freestanding emergency rooms. GNC Holdings, which runs a chain of health and nutrition products stores, plunged 35 percent in the first three quarters of the year.
The only profitable stock among the firm’s big four holdings was Amaya, the second-largest long. The maker of games for the casino industry, which accounted for nearly 18 percent of U.S. long assets, was up nearly 30 percent in the first three quarters.
“We have a concentrated portfolio of long-term investments, and we generally believe that when prices of stocks disconnect from fundamentals, that is an opportunity,” a spokesman for the firm tells Alpha. “Therefore, while unhappy with results this year, we think our portfolio has very substantial return potential, and don’t think that current prices necessarily mean much for where our investments trade even six or 12 months from now.”
