Hedge fund Hoplite Capital plans to shut down - letter

BOSTON (Reuters) - Hedge fund Hoplite Capital is returning money to outside clients after a period of sluggish returns, the firm’s founder, John Lykouretzos, told investors in a letter on Wednesday.

 

John Lykouretzos, founder and chief investment officer at Hoplite Capital Management, speaks during the SALT conference in Las Vegas, Nevada, U.S. May 18, 2017. REUTERS/Richard Brian

“I have decided to close the Hoplite managed funds and return third-party capital as soon as possible,” Lykouretzos said in the letter seen by Reuters.

Hoplite has not “generated the returns necessary to maintain the capital duration required to successfully implement our stock picking strategy without distraction,” he added in the letter.

The New York-based firm’s decision to shut down marks the latest in a string of hedge fund closures and illustrates how difficult it has become to run a profitable firm at a time investors have moved to cheaper passive stock funds.

At the end of December, the 16-year-old Hoplite had roughly $1 billion in assets, according to a regulatory filing.

Lykouretzos ranked among the industry’s brightest future stars when he left hedge fund Viking Global Investors to open his own business at the age of 29 in 2003.

Over its lifetime, Hoplite managed to stand out during times of market stress, including the 2008 financial crisis and again in 2011, 2015 and even last year, the manager wrote.

In 2018, when a late year stock market sell-off wiped away gains at many big hedge funds, Hoplite’s return was flat, outperforming the Standard & Poor’s 500, which fell roughly 5%.

In the first seven months of 2019, ended in July, the fund returned 7.3% net of fees.

However, “the alpha we generated has been overshadowed by underperformance in other periods,” Lykouretzos said.

Like other hedge funds, Hoplite had been hobbled by low market volatility. Lykouretzos made some changes roughly a year ago to put the firm on better footing, but the “reset to a flatter, nimbler team” was not enough.

He will now focus on returning investors’ money and helping his team find new opportunities, he said. The bulk of the money will be returned to investors on or before Sept. 6.

Hoplite’s decision to close comes only months after Tourbillon Capital Partners announced plans to shutter and Highfields Capital Management and Omega Advisors told clients they would stop managing outsiders’ money to become family offices, investing mainly their founders’ money.

At the end of the first quarter, US Food Holding Corp (USFD.N) healthcare information company IQVIA Holdings (IQV.N) and retailer Dollar Tree (DLTR.O) ranked among Hoplite’s biggest holdings.