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Whenever someone compliments hedge fund manager Loic Fery on his fund’s performance, he has the same response.
“I always invite them to meet in another 10 years to reconsider,” Fery, the CEO of $5.5 billion fund Chenavari Investment Managers, said in an email to Business Insider. “We cannot take anything for granted in our industry.”
It’s a mantra that many fund managers could probably heed.
Many hedge funds fail to live up to their promises to investors. The $3 trillion industry shrunk by about $70 billion last year, the biggest drop since 2009, according to data tracker HFR. Many funds have underperformed, leaving investors with high bills but little payout. In some cases, big investors like public pensions have reacted by moving their investments.
Several top-earning hedge fund managers last year, who also happen to run some of the biggest funds, earned payouts in the hundreds of millions and billions, despite running funds that didn’t beat the S&P 500.
Chenavari said the annualized performance of its multi-strategy flagship hedge fund is 7.6% net since its inception five years ago. The firm’sprivate credit European bank deleveraging fund returned 11% net since its inception in 2011.
Given the fund’s performance, Chenavari could potentially have raised more funds to invest. But Fery said he’s opposed to the notion of asset gathering in the industry, which some investors in hedge funds see as detrimental to performance and unfair.
“Many great investors have inspired me in pursuing that ambition to manage an investment firm focused on performance, as opposed to asset gathering,” Fery said in the email. “In particular, I have always highly regarded Warren Buffett for his long term view and his investment approach.”
“I am more impressed by high annualized returns over a long period of time than by those who are remembered as posting a one year amazing performance home run,” he added.