While growth stocks are suffering one of their worst bouts in recent history, the recent rebound in “value” has come too late to help one venerable asset manager.
According to Bloomberg, the Mill Valley, CA-based SPO Partners, a $5 billion hedge fund that’s managed money for almost five decades, is closing. The company which lists the billionaire Bass family among its numerous clients will return a quarter of its assets next month and most of the rest early next year. SPO said clients had asked to pull about 7% of its assets, or $344 million, by the end of the year. It returned about $3.3 billion to investors over the past six years after investments matured.
The challenges and the reason for the fund’s shuttering are the same as those faced by so many other value investors: “Today, we are finding it exceedingly difficult to deploy capital with an acceptable margin of safety”, wrote Eli Weinberg, SPO co-managing partner, in a letter to investors seen by Bloomberg.
“Businesses we admire, in well-positioned sectors with attractive growth prospects, are priced to perfection“, and in some cases, thanks to central banks, well beyond.
“SPO’s approach – buying discounted dollars with embedded margins of safety to drive attractive returns – is proving difficult to execute, and our recent returns bear witness to that” Weinberg admitted.
SPO was founded in 1969 when investor John Scully launched San Francisco Partners and was later joined by Bill Patterson and Bill Oberndorf. Patterson died in 2010, while Oberndorf retired in 2012 to invest his family’s money. Weinberg became a co-managing partner with Scully, 74, three years ago.
SPO’s closure underscores the difficulties faced by value investors in a time when central planning has flipped the world of investing on its head; other prominent names who have found the current environment impossible to create alpha include John Griffin, who headed Blue Ridge Capital, and closed his fund in 2017 while David Einhorn lost about 35% in the last three years. More recently, Eddie Lampert also foundered after his bet on Sears Holdings Corp. went awry. Meanwhile, growth stocks which have attracted the fascination of a new generation of traders, have rushed ahead of their inexpensive brethren.
