Stone House Capital Management is a New York-based hedge fund formed in January 2010 by 31-year-old Mark Cohen. Prior to founding his own fund, Mark Cohen honed his investment acumen at another New York-based hedge fund, Force Capital Management, where he worked as a senior analyst. Mark Cohen's preference for a concentrated portfolio goes hand in hand with his long-term value-based approach. As you might have guessed one side effect of this type of "put all your eggs in the same basket and watch that basket closely" investment strategy is volatility.
Mark Cohen earned a BS in Economics from the Wharton School of the University of Pennsylvania in 2004. The first time Mark Cohen raised public interest in his fund was when he spoke at the Harbor Investment Conference in Manhattan five years ago. He was introduced by Pershing Square’s Bill Ackman, who co-hosted the conference, and who was one of Stone House Capital’s biggest investors at the time.
Not being afraid of volatility is the characteristic that sets Mark Cohen apart from other hedge fund managers. In his own words: “This approach is one that I see as largely atypical in the money management industry today; where raising capital and minimizing volatility – not investment results – have become the primary measurement of success for many. Not us.” His unconventional approach has turned out to be brilliant, as Stone House Management Capital has delivered amazing returns throughout the years.
Starting from the beginning, the fund returned a fantastic 57.4% in its first year (2010) versus 9.2% for the S&P 500. That dominant first year was followed by gains of 15.0% in 2011, 40.7% in 2012, 36.5% in 2013, and 28.7% in 2014. The next two years were down ones for the fund, as it lost 47.9% in 2015 and 5.9% in 2016. The comeback since then has been exceptional. After those disappointing two years, 2017 was one for the record books, as Stone House returned an eye-popping 233.7%, beating the S&P 500 by a cool 211.9 percentage points. However, the fund's 2018 returns haven't been good, resembling those in 2015, with the fund losing 42% through early October. Nonetheless, from its inception through April 2018, Stone House Capital has generated a compounded annual return of 25.4%, nearly doubling the S&P 500’s return of 13.1% during that time.
As per its most recent plain brochure, at the end of December 2016, the fund had around $38.7 million in regulatory assets under management, managed on a discretionary basis. Its 13F portfolio was valued at $102.61 million at the end of June.