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.
Hedge Fund Performance
“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 the 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 respectively as of February 2017.
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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 (+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 (FWC) gained 5.5 percent for 2016, despite showing its best returns since 2013. Gondor also outperformed all the major U.S. indexes including S&P 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 fund 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 approximately -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 $5bn in assets under management and 91% are controlled by firms with over $1bn in assets. This is a significant increase from the 2009 percentages of 61% and 86% respectively
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.
Gondor capital management
Gondor Capital Management, LLC is a New York based investment management firm specializing in alternative investment strategies which seek to deliver consistent and non-correlated returns. Gondor Capital Management currently manages two hedge funds, Gondor Partners LP and Gondor Partners LTD.