Vincent Au, the portfolio manager at New York-based hedge fund management firm Gondor Capital Management, told investors that the best measuring stick in determining performance are the quarterly and yearly returns.
“A good measuring stick is the returns of a fund not monthly but quarterly and yearly,” Au said. He added, “While I am thrilled with Gondor’s returns, the number I am most proud of is 80% plus; that number reflects the percentage of months Gondor has been profitable since inception almost four years ago.”
Since inception in July 2013, the Gondor Partners LP and the Gondor Funds LTD generated 64.25% and 37.52% returns as of February.
Indeed, Gondor’s two hedge funds generated double-digit returns in 2016, outperforming most of its much larger counterparts. The firm’s domestic Gondor Partners posted a strong 26.53% in last year (up 1.64% in December) while the offshore fund Gondor Funds was up 26.85% during the same period (1.78% in December). Data provider Preqin has even included Gondor Partners and Gondor Funds LTC in its Top Performing Relative Value Strategies Hedge Funds for 2016.
In comparison, the average hedge funds paled with Gondor’s funds in terms of performance as the HFRI Fund Weighted Composite Index gained 5.5% for 2016, despite showing its best returns since 2013. Gondor also outperformed all the major U.S. indexes including Standard & Poor's 500 last year.
Smaller funds outperform mega funds, but assets go to big ‘brand names’
Au laments that Gondor funds have been outperforming many of the larger brand-name funds as well as competing funds, but his asset raising has not matched its consistent strong performance. In 2015, Gondor’s domestic and offshore funds returned 12.18% and 10.61% respectively, outclassing the HFRX Equity index which declined 2.33% as well as the S&P 500 index which fell 2.6% during the same year.
He added, “There are hundreds, maybe thousands of studies that show smaller hedge funds outperform mega funds. To be clear, not every small hedge fund is going to do well or outperform mega funds over the long term. When I see the returns of some other funds whose returns are astronomical, it is hard to not think these funds are either really lucky, in the right sector or caught a shooting star. But it is also not hard to think the managers are taking an extremely high risk in generating those outlier returns.”
Agecroft Partners LLC managing partner Donald A. Steinbrugge cited data from Hedge Fund Research showing that hedge funds with strong brands attract the most assets. He said that data from HFR showed a large amount of hedge fund assets flowed into a small minority funds with the strongest brands.
An estimated 69% of hedge fund assets are controlled by firms with over $5 billion in assets under management and 91% are controlled by firms with over $1 billion in assets. This is a significant increase from the 2009 percentages of 61% and 86%.
To raise capital, Gondor is looking for long term investors who share Au’s investment philosophy as an investor. “A significant part of my net worth is in the Gondor fund and I am here for the long term and want partners who share that belief,” he said.
DISCLOSURE: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I am receiving compensation for the article.
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