Bronte Capital Management founders John Hempton and Simon Maher first started putting together seeding deals in in 2008, but as they explain in their final investors’ letter that came out this week, the deals dried up by 2009 and they were forced to find another way to bring in capital. Fortunately a wealthy Bay Area investor, ‘Joe’, decided to invest in a separately managed account and that became the reference US account that Bronte has reported on until now.
First account closed to buy a ranch after quadrupling in five years
“Joe’s account has quadrupled over these 5 years – but money only goes so far. Last month he got the opportunity to buy a ranch. We have seen the pictures and understand the attraction,” they write. “A dream of his could be fulfilled and so our US reference account has been liquidated and these letters will come to an end.”
Bronte Capital now manages pooled funds, as intended back in 2009, but Hempton and Maher recommend separately managed accounts to young fund managers looking for a way to get some initial funds and build a reputation. They’ll also continue to write regular letters covering their pooled funds, and the Australian fund’s letters will be posted online (posting the US fund letters online is apparently prohibited by marketing restrictions).
Bronte Capital has put up impressive numbers since 2009
Since the reference US account was open from 2009 to now it has the benefit of capturing returns from a fairly long bull market (including last year’s huge returns), but the final stats are still impressive. The annualized return since inception is 31.5% with a 293.2% cumulative return compared to 13.7% and 90.2% for the MSCI ACWI (all country index), with a correlation of 0.44. The sharpest rise came in early 2011, with another period of strong gains between late 2012 and this summer.
The annualized standard deviation was 19.6%, higher than the MSCI ACWI’s 15%, but the maximum drawdown for Bronte Capital’s US reference account was 16.5% versus 20.5%. The reference account’s Sharpe ratio was 1.50 versus 0.93 for the MSCI ACWI. The reference fund had 1.5% management fees and 15% performance fees, compared to a 1.5/20 fee structure for the pooled funds, but the pooled funds benefit from a high water mark that the reference account didn’t have.