Pennant Capital Closing One Fund in Move to Improve Returns

  • Portfolio managers Joerg Diedrich and Lee Atzil to leave.
  • Pennant's oldest fund up 15% a year on average since 2001.

Pennant Capital Management, the investment firm founded by Alan Fournier, is closing one of its hedge funds in a move to boost returns.

The Summit, New Jersey-based firm, which manages about $6 billion, is shutting its $1.5 billion Broadway Gate fund on Nov. 30, Pennant told clients in a Sept. 2 letter. Joerg Diedrich and Lee Atzil, two money managers who started Broadway Gate in 2008 and merged the firm with Pennant two years later, are leaving the firm at the end of this month.

In the past few years, “we have not been delivering for our investors in a satisfactory way,” Fournier wrote. “I am writing today to announce changes I believe will allow us to simplify our organization, sharpen our decision-making process and reduce our capital base.”

Fournier, who primarily trades stocks, has always capped his Pennant fund at $500 million, handing back more than $1 billion to investors since its start in 2001. The fund has returned an annual average of 15 percent since inception, according to an investor, who asked for anonymity because the information is private. This year, the fund was up 3.7 percent through August, after losing less than 1 percent in last month’s global market turmoil. Broadway Gate returned 5.4 percent in 2015 through August, the person said.

Cash Transfers

Pennant is offering investors in Broadway Gate the chance to put a limited amount of cash into its Windward fund, which manages $4 billion. Broadway Gate, Pennant and Windward funds hold many of the same mid- and large-cap stocks, although Broadway Gate’s positions are more concentrated, according to the person. Fournier limits the assets in the Pennant fund because it also trades small-cap stocks that are less liquid. 

Fournier started Pennant with $12 million after working for six years for David Tepper’s Appaloosa Management. He intends to cap assets under management for the foreseeable future, according to the letter.

An official for Pennant declined to comment on the changes.
Atzil and Diedrich didn’t return calls seeking comment.