Hedge Funds Criterion, Highfields Shutting Down

The two alternatives firms will close at year-end, unhappy with recent performances.

Two hedge funds with almost $15 billion in total assets have announced they are folding, according to The Wall Street Journal.

Highfields Capital Management announced the closure of its $12.1 billion hedge fund earlier in the week after founder Jonathan Jacobson sent a letter to investors Wednesday, informing them of his plans to convert the fund into a family office. It had been around since 1998, when Jacobson ditched a trading job for Harvard’s endowment, which became Highfields’ first client.

“After three-and-a-half decades of sitting in front of a screen, I realized I am ready for a change,” Jacobson wrote, explaining that he made his decision after he realized he “could not pull the trigger on making a multi-year commitment to a few potential key hires.” He also admitted that he was not pleased with the firm’s results over the “last few years.”

Meanwhile, Criterion Capital Management has decided to shut its $2 billion fund due to management’s unhappiness with the fund’s performance, even though its long-only portfolio grew by more than 850% since it opened 16 years ago. That portfolio beat the S&P by more than 550%, the WSJ reports.

The firm said it would rather invest over a three- to 10-year period than shorter terms, which underperformed. Examples cited were investments on Amazon, Netflix, Salesforce, and Tencent, which faced “significant drops” during the brief periods it chose to hold the stocks.

Although Criterion’s owners Christopher Lord, David Riley, Tomoko Fortune, John Micek, Jeff Sanguinet, and Louis Chang didn’t say what they would do next, the letter did hint at the possibility down the road.

“We feel compelled to realize our full potential as investors in a different construct,” Criterion said in its letter. Rather than reorganize its existing framework, the organization said it had “decided to wind down the funds while we formulate the next chapter.”

Highfields will return about $10 billion to clients, and the portfolio will be “methodically and opportunistically” liquidated rather than hitting an arbitrary deadline with a fire sale.

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