Alan Fournier Shuts 17-Year-Old Hedge Fund Pennant CapitalBy
Manager cites recent poor performance for returning capital
Billionaire David Tepper seeded Pennant with $12 million
Hedge fund manager Alan Fournier is returning client capital at his $1.5 billion Pennant Capital Management after almost two decades, the latest veteran stock-picker to close his fund following struggles to make money since the financial crisis.
“While I take great pride in our long term returns, especially in light of our consistent low risk portfolio structure, our recent returns have been disappointing,” Fournier wrote Tuesday to investors. “I have been frustrated by our inability to match our historical results and deliver appropriate returns for our investors.”
The manager founded his firm in 2001 with $12 million from his mentor, billionaire David Tepper. Over the life of the equity hedge fund, it posted an annualized gain of 11.9 percent compared with 6.4 percent for the S&P 500 Index, the letter said. Yet from the beginning of 2014 through today, he’s returned just 2.4 percent, according to people with knowledge of the fund’s performance.
Fournier will convert Pennant into a family office, managing his own fortune.
Fournier, 56, is a long-short stock picker, and like many of his peers, he’s found it hard to profit in the face of persistently low interest rates and the rise of quantitative and passive investing. At the end of last year, John Griffin closed $6 billion Blue Ridge Capital after more than two decades in business. John Burbank, who started Passport Capital in 2000, shut his flagship fund, citing “unacceptable” losses.
Pennant’s best year was 2007, when it made 42 percent. The next year Fournier lost just 2 percent, when hedge funds on average fell almost 20 percent as the financial crisis unfolded. In 2009, his fund climbed 23 percent. Assets peaked at around $7 billion in 2014.
It was Tepper who encouraged Fournier to start his own firm, according to an interview that Fournier gave to Value Investor Insight in 2007. He had joined Tepper’s Appaloosa Management in 1996 to focus on global equity investments. “He said it was time for me to do my own thing,” Fournier told the publication.
Before Appaloosa, he had stints at Hagler, Mastrovita and Hewitt; Pzena Investment Management and Sanford C. Bernstein.
Fournier plans to return a substantial portion of the fund’s capital by the end of April.