Harsh Market Has Taken Down Another One – Jabre Capital Partners Is Returning Client Money

This year’s resilient market environment has managed to beat many hedge funds, including Philippe Jabre’s Jabre Capital Partners, John Jacobson’s Highfields Capital Management, John Labanowski’s Brenham Capital Management, Joshua Kaufman’s Brenner West Capital Partners, Jason Karp’s Tourbillion Capital Partners to name a few. Some of these are large hedge funds that have managed billions of dollars.  To make the things even worse, this is the trend that started 2 years ago with Richard Perry’s Perry Capital, and it continued with Eric Mindich’s Eton Park Capital Management LP and John Griffin’s Blue Ridge Capital LLC, among others. It is interesting to note that in spite of these difficult conditions there are some hedge funds that continue to thrive like Jeffrey Talpins’ Element Capital Management, which posted some incredible return figures this year as well.

Getting back to those who were forced to shut down, we’ll talk about the fund, which was the latest to share that fate – Jabre Capital Partners. The fund was launched in 2006, and it is based in Geneva with an additional investment office in Dubai. Jabre Capital Partners was founded by Philippe Jabre, who is its Chief Investment Officer. Prior to forming Jabre Capital Partners, Philippe Jabre worked at GLG Partners LP, and at that time he was accused of trading on insider information by The UK Financial Services Authority. Supposedly, he was shorting Sumitomo Mitsui Financial Group’s shares on information the bank was going to sell convertible bonds. Philippe Jabre was fined with a then-record high £750,000  ($946,500), and he was banned from further trading in London. Ultimately, Philippe Jabre quit GLG Partners LP and moved to Switzerland, where he started his own firm. Many years after the incident, when asked to comment the charges, Philippe Jabre explained that market rules weren’t clear and precisely formed back then, as they are now. After this market abuse scandal, Jabre has come a long way, and he has managed to rebuild his reputation, earning many industry awards, including the Fund of the Year award in 2013. He earned his Masters in Business Administration at Columbia University, New York back in 1982.

Harsh Market Has Taken Down Another One - Jabre Capital Partners Is Returning Client Money

Now, after the years of posting good returns, Jabre Capital Partners is returning money to investors in its three funds that are directly run by Philippe Jabre, while the rest two funds will continue to operate. According to Bloomberg, a Sicav version of Jabre Capital’s global balanced fund is down 42% since January through December, and Luxembourg-incorporated version of its convertible bonds fund has lost 18%. Philippe Jabre disclosed in its last Investor Letter that he plans to return most of the proceeds by February and that he will be selling positions in a “disciplined manner”. According to the fund’s document from April, the fund had around $1.2 billion in assets under management. It seems that Philippe Jabre considers one of the main culprits for his fund’s poor performance volatile environment which became harsh to predict mostly thanks to computerized models who have taken over the roles of usual participants. To digress, billionaire Leon Cooperman recently said that computerized trading has created “a Wild, Wild West environment in the stock market” (more about his perspective you can read in billionaire Leon Cooperman’s new stock picks). Continuing with Philippe Jabre, he further stated “In previous periods, weakness created opportunities but as we survey the outlook for 2019, we are concerned that we don’t see those opportunities. Both the political and economic outlooks remain confused and without clear direction.”

In the light of these recent events, we thought it would be wise to take a look at the Jabre Capital Partners’ top holdings from the end of the third quarter, as the prices of these stocks may drop because of the selling pressure.

Jabre Capital Partners disclosed in its last 13F filing having the biggest position in the third quarter in Alibaba Group Holding Ltd (NYSE:BABA), which occupied 3.19% of its equity portfolio. The position counted 58,700 shares, that were valued $9.67 million. Over the last six months, Alibaba’s stock has lost 26.47%, and it is currently trading at $151.92. The number of smart money investors from Insider Monkey’s database long Alibaba increased by 10 in recent months, and at the end of the third quarter there were 127 bullish hedge funds.

The second largest stake the fund had in Caesars Entertainment Corporation (NASDAQ:CZR), and included 660,000 shares with a value of $6.77 million. There were 62 investors from our table with long positions in Caesars at the end of Q3 2018, up from 58 in the previous quarter. Year-to-date the company’s stock lost 40.56%, and at the moment of writing, it is trading at $7.40. In Alphabet Inc Class A (NASDAQ:GOOGL), Jabre Capital Partners had invested around $6.04 million which amounted to 5,000 shares and represented its third largest holding on September 30. Over the past 12 months, Alphabet’s stock (NASDAQ:GOOGL) gained 1.7% and it is now trading at $ 1069.33.

Fourth and fifth most valuable positions in the fund’s equity portfolio at the end of the third quarter were in Wells Fargo & Co (NYSE:WFC) and Microsoft Corporation (NASDAQ:MSFT), counting 110,000 shares with a value of $5.78 million and 43,600 shares worth $4.99 million, respectively.

It remains only to wait and see if Jabre Capital Partners’ closure will influence these stocks prices. In the meantime, you can get familiar with our proprietary methodologies that aim to identify the best and worst hedge fund managers and their best and worst stock picks. For example, our latest list of best hedge fund stocks lost only 1.5% since November 15th vs. a loss of 3.3% for the S&P 500 ETF (SPY). Our latest list of the worst hedge fund stocks (which we recommended our subscribers to short) lost an average of 8.5% during the same period. So, our subscribers were able to beat the S&P 500 Index both on the long and short sides of their portfolios (read the details here).

Disclosure: None.

This article was originally published at Insider Monkey.