Soroban Capital Partners has launched a new hedge fund: Soroban Special Investment Fund LLC - Series A.
According to a regulatory filing, the New York hedge fund firm has raised more than $50 million for the fund. Soroban declined to comment, but a knowledgeable source says the fund will be only a fraction of the size of the firm’s two main funds.
At the beginning of the year, Soroban managed a total of $9 billion. Meanwhile, Soroban has turned what started out as a dismal year into a profitable one, staging a strong recovery since its flagship fund, Soroban Master Fund, posted a more than 9 percent loss in the first quarter. The fund rose 5.2 percent in the second quarter, cutting its loss to 4 percent. After a profitable July it was up 1.1 percent through August 26, according to a knowledgeable person. The fund finished down 1.1 percent last year after losing 2 percent in the fourth quarter.
Soroban Special Opportunities Fund, launched in 2014 to focus on the firm’s best investment ideas, was up 5.8 percent through July and 10.1 percent through August 26. The firm described the fund in an earlier letter to clients as “an opportunistic, concentrated portfolio.”
Soroban is an event-driven firm. It characterizes itself as taking a deep fundamental investment approach with a value orientation. Many of its largest positions tend to wind up as merger arbitrage plays.
The firm was launched in late 2010 and is headed by Eric Mandelblatt and Gaurav Kapadia. Mandelblatt worked at Goldman Sachs from 1998 through 2005, starting as an equity research analyst in the investment research department, covering natural gas pipeline and distribution companies, and master limited partnerships. He became chief operating officer of the firm’s U.S. principal strategies business in 2004.
Kapadia was previously a partner at TPG-Axon Capital Management, where he spent nearly six years.
About two-thirds of Soroban’s assets are invested in the flagship fund and the other one-third in Opportunities.
The firm generally charges a 2 percent management fee and between 15 percent and 30 percent of performance. Soroban manages a very concentrated portfolio. At the end of the second quarter, the firm had positions in just 16 individual U.S. stocks, six of which were new investments made in the period. It also had nearly 30 different positions in put and call options.
The two largest options positions were calls on the stocks of two companies involved in major deals—AT&T, which completed its acquisition of DIRECTV in August 2015, and Anheuser-Busch Inbev, which is close to completing its acquisition of SABMiller. Soroban’s largest single stock position was also Anheuser-Busch. The shares were up nearly 6 percent in the second quarter but are down less than 4 percent since then.
AT&T was up about 10 percent last quarter but down 5 percent since the beginning of July.
Soroban’s second largest individual stock long in the second quarter—and its largest new single stock purchase in the period--was cable and internet giant Charter Communications, which in May acquired Time Warner Cable and Bright House. Shares of Charter were up nearly 13 percent in the June quarter and more than 10 percent since then.
Time Warner Cable was Soroban’s largest single-stock position at the end of the first quarter while Anheuser-Busch was second. Liberty Broadband, Soroban’s fourth largest single stock holding and second largest new single stock position in the second quarter, has also been performing well. It is up nearly 15 percent just since the end of the second quarter.
Soroban does not like to be called an activist. But in 2014 the firm and Keith Meister’s New York–based Corvex Management reached an agreement with pipeline giant Williams Cos. in which Mandelblatt was appointed to the board of directors.
On June 30 of this year, Mandelblatt was one of six Williams directors to resign one day after Energy Transfer Equity officially called off its planned merger with Williams.
In June, however, when Soroban said in a regulatory filing it owned 5.1 percent of Yum! Brands, it used form 13G to make the required disclosure, which suggests it was a passive—and not activist—position.
