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- Maverick Capital, a $10.5 billion hedge fund run by Lee Ainslie, told clients that its disappointing performance is about to turn up. That’s based on past experience, Ainslie told clients in a letter. Ainslie wrote: “Previous to this current period, Maverick had only suffered eleven five quarter periods with negative returns in our history, and Maverick has delivered positive returns in the following year every time.”
Maverick Capital, a $10.5 billion hedge fund that’s been having a rough year, says it’s just about to turn up.
The firm’s flagship fund is down about 2% this year, people familiar with the matter said. In an October 20 letter to clients, the firm said it’s expecting an uptick – because that’s what has happened every other time in the firm’s 24-year history.
Here’s founder, Lee Ainslie, on the firm’s chances of recovery, with emphasis added. For background, the Dallas-based firm launched in 1993.
“I believe our historical recoveries after previous disappointing periods plays a role in this collective confidence. Previous to this current period, Maverick had only suffered eleven five quarter periods with negative returns in our history, and Maverick has delivered positive returns in the following year every time. Indeed, the current period reminds me of 2011, when we suffered through a five quarter period that was slightly worse than the past five quarters. After that disappointing period, we had an exhaustive review of our portfolio (which led us to increase certain positions and eliminate others – just as we have done over the last few months), revamped our team, and made several meaningful improvements to our process. These changes led to one of the strongest multi-year periods in our history, and I believe we are poised for another period of sustained success.”
0% performance fees
The client letter, which recaps the firm’s investor day in New York earlier this month, also discusses the debut of a share class for existing investors that includes no performance fees before hitting the client’s high watermark.
That fee class allows existing investors to invest up to 50% of their current balance, charging a 1% management fee and no performance fee until current high water marks are hit, the letter said.
The firm has also lowered other fees via new share classes. Maverick is charging anywhere from 1 and 10 on capital that is committed for five years, to 2 and 20 for investors who agree to one year, for instance.
In the client letter, Maverick said it has received fresh money from investors over the past two years, despite the disappointing performance.
Maverick told clients earlier this year that its underperformance was related to, among other things, its short book.
“The median stock in our investable universe was up 7.7% in the first half of the year, and our shorts were up 12.6% – outperforming (to our detriment) the median stock by almost 5%,” Ainslie wrote in the a client letter over the summer, which was previously covered by Business Insider.
Maverick’s flagship fund was down 10.6% last year after fees, according to performance numbers reported in client documents.
A Maverick spokesman declined to comment.