John Burbank’s Passport Capital had a disappointing 2011 performance. The fund’s flagship fund was down 18.4% for 2011. Burbank attributed much of the under-performance in 2011 to the fund’s investments in private, illiquid assets.
The flagship fund currently has $1.8 billion in assets under management, and total assets in Passport Capital is close to $4.0billion.
John Burbank is very bearish about 2012. The Global fund currently has a net exposure of only 7%. Burbank noted the following reasons for his caution regarding 2012:
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1. The European Sovereign debt crisis is only getting worse. The Euro is falling and the EU will experience deflation.
2. China’s new annual GDP growth should be closer to 7%, down from 9% from prior years. China’s debt load is far worse than the Government states. China will be busy suppressing bubbles, and foreign reserves may already have peaked.
3. Commodity inflation is awful for growth. The price of food and oil will lead to lower growth in emerging markets.
Burbank stated “With food, we’re always just one harvest away from riots, unrest, and even war.”
Burbank is reducing illiquid investments for 2012. The fund is increasing its hedges and short positions. The fund has added physical gold to its holdings. Gold will do well in an inflationary environment and will do better than stocks in a deflationary environment.
Some of the top holdings of the fund are: Marathon Oil (MRO), Priceline.com (PCLN), Vivus (VVUS), and WebMD (WBMD).