John W. Henry to Stop Managing Client Money

Discussion in 'Wall St. News' started by stepan7, Nov 9, 2012.

  1. stepan7


    John W. Henry to Stop Managing Client Money


    John W. Henry & Co., a trading firm controlled by the principal owner of baseball's Boston Red Sox, told clients it will stop managing their money at yearend amid dwindling assets and slumping returns.

    John W. Henry, which managed more than $2.5 billion in 2006, today oversees less than $100 million, Mr. Henry said in an email. The firm will continue to do some trading for its own account.

    "The firm has been small since 2007 and once assets fell below $100 million this year the company became too small to sustain itself," Mr. Henry wrote. "We have been returning assets to investors with a desire to exit the client business by year end."

    John W. Henry is one of the best-known commodity trading advisers, or CTAs, which trade by following trends in various commodity, currency, debt and equity markets. The firm, a hedge-fund-like operation based in Boca Raton, Fla., scored big gains earlier in its existence, helping Mr. Henry's investment group buy the Red Sox.

    Mr. Henry hasn't had a hands-on role at the trading firm in recent years.

    Fenway Sports Group, the parent company that houses his sports interests, also owns the Red Sox's historic ballpark, Fenway Park, and Premier League stalwart Liverpool Football Club.

    Amy B. Hanson, a marketing manager for John W. Henry, sent an email to clients on Friday informing them that "JWH has determined to cease managing client assets" as of Dec. 31. "We will not be providing performance information going forward," Ms. Hanson wrote.

    That performance has faltered in recent years, slumping badly in 2012. The returns of Henry's five trading programs available for its investors have ranged from a loss of nearly 1% to a loss of over 21% this year, and a loss about 2% to a loss of about 32% over the past year, according to the firm.

    Two of John W. Henry's funds are each down more than 6% over the past three years, the firm said. Over five years, they are up 8.8% and 4.6%.

    "The current market environment of low volatility, where policy makers have been effective at managing prices, has proven especially challenging for trend-following trading strategies," Kenneth Webber, the firm's president and chief operating officer, wrote in a letter to clients in September entitled "Low Volatilty Creates a Challenge for Trend-Followers."

    In the letter, Mr. Webber said the firm suffered losses from grain trading and energy investments.

    "We appreciate the patience of our investors during this difficult period," Mr. Webber wrote at the time.

    The performance of Mr. Henry's firm, established in 1982, has long depended on long-term, distinct trends in various markets. The firm generally searches for markets that are making significant moves and jumps in, betting that they will continue. The choppy markets of recent years, and a relatively placid 2012, both have hurt.

    There have been few distinct, dramatic trends for these kinds of traders to pursue. Mr. Henry's firm has scored some gains in some of its trades, according to its most recent letter to investors, but they haven't been enough to offset losses.

    Clients, including many individual investors, had exited the firm even as many hedge funds enjoyed an influx of cash from investors. In 2007, for example, Merrill Lynch & Co. withdrew about $600 million of investments from Mr. Henry's firm. The move left the firm with about $500 million.

    At the time, Mr. Henry said: ""It's very painful, one never gets used to poor performance periods."

    The decision caps a rough year for Mr. Henry. His Red Sox finished in last place in the American League East during the 2012 season, 26 games behind their archrivals, the New York Yankees.

    Mr. Henry's soccer team, Liverpool, has also been struggling, despite a coaching change at the end of last season. Once the most-decorated club in England, Liverpool has won just two of 10 games this season and is mired in 12th place in the Premier League.
  2. I'm afraid this is signaling the long term death of trend following.
  3. etile


    wait for the next bull market. until then go to hibernation.
  4. adapt or die.
    having over $1B and not investing money into research of new tradng methods?

    super ignorant and hyper foolish
  5. Ash1972


    When people (especially people such as marketsurfer) say things like this it generally means trend following is on the verge of an enormously profitable period.
  6. its not just him. the whole hedge fund industry is dying because they havent added value for years and this year is one of the worst:

    Why Have Hedge Funds Underperformed in 2012?
    The chart above raises a very interesting question: Why are hedge funds underperforming this year? In general, the answer would involve costly fees, and no Alpha creation — but what is it about this year that is so problematic?

    A few theories have been trotted out:

    • Excess Correlation
    • Lack of clear trend
    • Federal Reserve Intervention

    I doubt any of these are the answer — I think there are two primary possibilities:

    1) Managers have been excessively timid this year. (I am not sure why given Fed guarantees of ongoing liquidity).

    2) Nassim Taleb’s suggestion that the Alpha that most managers create is the result of dumb luck, and not skill.
  7. 3) There is only a limited "amount" of alpha out there to be captured.
  8. Take out constant inflows from "retail", and the concept of sustainable alpha becomes pretty tenuous.
  9. Good point...and speaking to the point about fund managers being timid in spite of the Fed's liquidity measures...well just look at what the market has done since the latest QE marked an intermediate top.
  10. etile


    lmao. the guy is owner to 2 multi-billion dollar sports organizations are you're giving him flak????

    only on ET.
    #10     Nov 10, 2012