This Hedge Fund Blew the Doors Off in 2018 One of last year’s best performers was a long-short equity fund founded by a PointState and Duquesne alum who’s focused on the software sector. Amanda Cantrell January 24, 2019 Angus Mordant/Bloomberg While the average hedge fund lost money last year, a handful managed to post gains. But few approached the realm of Center Lake Capital. The $150 million, technology-focused hedge fund generated gains of about 76 percent, net of fees, according to people with knowledge of the New York-based fund’s performance. The fund is said to have compounded at about 24 percent net of fees since its inception in 2014. Center Lake is headed by Adam Parker, who worked at Stan Druckenmiller’s Duquesne Capital Management and then PointState Capital, the hedge fund firm that spun out of Duquesne after Druckenmiller retired in 2010. There, Parker managed a portfolio of technology stocks and also headed up technology risk management for the firm. Parker, who earned an undergraduate degree from the University of Pennsylvania in 2008, started his professional career at Force Capital Management, a long-short equity hedge fund headed by former SAC Capital Advisors portfolio manager Bob Jaffe. Parker had dabbled in the market in college with the money he made from selling an internet company he co-founded with a friend, an individual close to the firm said. It’s No Anomaly – Personal Relationships Matter Big Time in Algorithmic Trading[/paste:font] The people with knowledge of Center Lake’s performance said Parker likes to run a concentrated portfolio — about 60 percent of its long assets are in the top five positions — that zeroes in on a specific subsector within tech. These days, the fund’s long book is focused exclusively on the software sector, according to the people. Parker is particularly drawn to mid-cap enterprise software providers, these people say, because these companies have high gross margins, low capital expenditures, and high growth potential. Many have gone public for strategic reasons in the past few years — as global enterprises tend to trust software providers that are public more than private ones — and the pipeline for initial public offerings is strong. One big winner for Center Lake last year was software maker Okta, which gained nearly 150 percent last year, and software company, MongoDB, which surged about 182 percent. A current long holding is another enterprise software company, Coupa Software, which is up about 24 percent this year through Thursday. Center Lake offers incentives for investors to keep their capital locked up for longer, according to the people. The firm offers a quarterly share class with a 2 percent management fee and 20 percent performance fee. Those fees drop to 1.5 percent and 20 percent in exchange for a year-long lockup and 1 percent and 15 percent for three years. Parker’s team also includes director of operations Rich Passer and senior analyst Anjelo Austria, who recently joined from Morgan Stanley, where he worked for analyst Keith Weiss’s software equity research team. https://www.institutionalinvestor.com/article/b1cv3fwpjcjw6d/This-Hedge-Fund-Blew-the-Doors-Off-in-2018?utm_medium=email&utm_campaign=The Essential II 12519&utm_content=The Essential II 12519 Version A CID_7136a281f45b8735c9b63c2869a8c83a&utm_source=CampaignMonitorEmail&utm_term=This Hedge Fund Blew the Doors Off in 2018
He is smart to be targeting software companies. Building and selling software can be an amazing business. The software company I worked at for 13 years experienced amazing growth when I first started in 2005 but then made a few strategic bad decisions and then growth stalled. A local software company in my area founded in 2010 just cracked 100 million in yearly revenues. I bet they don't even have 100 employees.
Sounds like equity value investing - most positions are held for 3 years. Parker wants the firm to "grow thoughtfully and slowly." Parker said "Risks are managed through concentrated portfolios, limited leverage and investing in business." https://www.opalesque.com/655746/New_TMT_hedge_fund_adopts_the_approach574.html