If you read mainstream media, you probably know that hedge funds turned into vehicles that transfer wealth from investors to hedge fund managers. The problem is the investors. They don’t know which hedge funds are good and which are bad, so they hand their money to big hedge funds. Unfortunately, this worsens the problem because large hedge funds invest in large-cap stocks and they really can’t generate any alpha after their huge fees.
Fortunately, there are smaller, nimbler hedge funds for investors who are interested in generating meaningful alpha. Mangrove Partners is one of these hedge funds. It was founded by Nathaniel August in 2010. It returned 44% annually in its first 3 years. It also returned 26.6% in 2014 (average annual return for 2012-2014 was 20.6%). We couldn’t find its 2015 but it can’t be good. Finally, Mangrove Partners was one of the best performing hedge funds, returning 50.9% after fees in 2016.
So how did they do it? Buy low, go activist, and sell high. Nathaniel August accumulated a 7+% stake in RPX Corp (NASDAQ:RPXC) last year by buying it at prices below $10. Mangrove last reported adding nearly 400K shares following the Brexit vote at the end of June. At that time their average price was about $8.80. Today’s filing shows that August is taking some money off the table and $11.70 is the magic number. The details of the recent purchases and sales can be seen below:
Ownership Summary Table
|Name||Sole Voting Power||Shared Voting Power||Sole Dispositive Power||Shared Dispositive Power||Aggregate Amount Owned Power||Percent of Class|
|The Mangrove Partners Master Fund, Ltd||0||2,977,235||0||2,977,235||2,977,235||6.1%|
|The Mangrove Partners Fund||0||2,977,235||0||2,977,235||2,977,235||6.1%|
|The Mangrove Partners Fund (Cayman), Ltd||0||2,977,235||0||2,977,235||2,977,235||6.1%|