A. Alex Porter, a well-known manager in the hedge fund industry, died on April 18th at the age of 75. Porter Management survives today at Amici Capital and its flagship fund generated annualized returns of about 20% during his stewardship.

Amici Capital, a global long/short equity fund manager, now has about 27 employees and $2.2 billion in assets under management, according to the latest letter to investors, a copy of which was reviewed by ValueWalk. His New York-based Amici was formerly known as Porter Orlin and before that, Porter Management when it was first founded in 1976.

Hedge fund founding father

Alex Porter joined hedge fund manager A.W. Jones as a portfolio manager in 1967, where he remained until moving to Sanford Bernstein in 1972. A.W. Jones is regarded as the world’s first hedge fund.

As a protégé of the first hedge fund manager and an industry pioneer himself, Alex applied lessons he learned at the first hedge fund in his investing.

James Grant, a friend and colleague who publishes Grant’s Interest Rate Observer, said: “Porter carried the long-ago notion of a “hedged” fund as one that is ‘long and short’ and thereby inured to the vicissitudes of the overall market. He said: “Today, by contrast, the term ‘hedge’ suggests ‘leveraged and long’ investing which often amplifies rather than cushions market swings”.

Alex Porter’s shorting strategy

Kathryn F. Staley wrote in “The Art of Short Selling” that Porter’s hedging strategy included being short companies, “where financial legerdemain denotes something is seriously wrong”. She further wrote: “These companies, where management doesn’t own much stock, where management is not realistic and forthright about their business, and where the company itself is leveraged or has a fatal balance-sheet flaw”.

The name Amici (‘friends’ in Latin) reflected that only three friends came through, writing checks totaling $360,000, though Porter solicited startup money from 30 people.

Alex Porter said in 2005 that his firm Porter Orlin Inc. wouldn’t register with the U.S. Securities and Exchange Commission, which had mandated a rule requiring registration by hedge-fund advisers with 15 or more clients. However, in 2006, the three-judge panel of the U.S. Court of Appeals in Washington unanimously struck down the rule, citing the complexities in regulations.

Strong return by Amici

While Porter served as a managing member of Amici Capital, LLC, Paul E. Orlin is the managing member and portfolio manager of the firm. Alex Porter had been a trustee of Davidson College since 1992, and served on the boards of several organizations including Rollcast Energy, Inc. Porter served on the Advisory Board of Murdock Capital Partners Corp. Alex received his Bachelors of Arts in English from Davidson College in 1960.

The following graph from an April letter to investors highlights strong return posted by Amici, as well as, the recent underperformance:

Cumulative return of Amici strategy

The following table captures the monthly net performance posted by Amici strategy since 1994:

Amici-Monthly net performance