Jonathan Auerbach and Scott McLellan were the joint founders of long/short equity fund Hound Partners. The fund was founded during 2004, and, as is the case with many Tiger Funds, was started with seed capital from Tiger Management.
LAST UPDATED Augsut/7/2020
Jonathan Auerbach previously worked at Ziff Brothers Investments and then Tiger Management where he was put in charge of a new fund that would ultimately become Hound Partners.
Scott McLellan was brought in by Jonathan Auerbach to help him run Hound Partners shortly after inception. Prior to that, McLellan worked at Highbridge Capital. During 2007, Scott McLellan left to form Marble Arch Partners with Timothy Jenkins. Jenkins is another Tiger alumni.
Jonathan Auerbach: Hound Partners
Like almost all of the Tiger Cub funds, and those funds started with seed capital from Julian Robertson, Hound Partners uses a long/short fundamental equity strategy. Hound was provided with seed capital from Julian Robertson. The fund currently manages around $3 billion. Like most Tiger seeds, Hound’s headquarters are located in Tiger Management’s offices on the 47th and 48th floors of 101 Park Avenue in midtown Manhattan.
Hound doesn’t pay much attention to macro implications, using a bottom-up approach to picking stocks. Also, Hound tends to run a highly concentrated portfolio of stocks and management have, in the past, made heavy use of derivatives to express the fund’s investment viewpoint. Hound’s top positions can account for more than 10% of the total portfolio with many positions going unreported because they trade otc or other illiquid markets. Due to its concentrated basket of stocks, Hound is a good fund for tracking purposes as you know they have conviction in their plays.
Hound has always been a fan of what are known as LEAPS options. Long Term Equity AnticiPation Securities, their technical name, are options on stocks and indexes that go out two years or longer.
An example of a Hound trade: For full-year 2011 Hound returned 18.97%, net of fees and expenses. The long side of the portfolio contributed 5.58% while the short side picked up 17.73%. Around one-third of total profits came from a massive short bet on the global solar sector.
Hound Partners: Articles
- Hound Partners Sells Volatility At Top In 2014, Grabs Citigroup Options in Value Play
- Jonathan Auerbach’s HOUND PARTNERS Just Released Its Q1 2015 Equity Positions
- Tiger Seed Auerbach’s Hound Partners Launches New Funds
- Tiger Seed Auerbach’s Hound Partners Mulls Long-Only Fund
- A Good Year for Tiger Offspring | Institutional Investor
- Jonathan A. Auerbach of Hound Partners Llc
- Tiger Seed Auerbach’s Hound Partners Mulls Long-Only Fund
- Jonathan Auerbach’s hound partners bets on Transdigm
- Jonathan Auerbach’s Hound Partners Discloses Two Positions
- Hound Partners Raises Over $200M For Pair Of Hedge Funds
- Jonathan Auerbach’s Hound Partners Bets on Micro Cap
Scott McLellan: Marble Arch
Like Hound, Marble Arch runs a highly concentrated, long/short equity focused portfolio. At the end of 2014 the fund had 22 long positions and was looking to reduce the size of the portfolio further in the near future. 20 positions is the target. During the fourth quarter of 2014, the fund’s top ten longs averaged 63% of capital. Marble Arch targets a gross exposure of 150%.
Marble Arch favors stocks that are trading at an attractive valuation have a strong competitive advantage and are driving change through reorganization, cost cutting, and acquisitions. In the fund’s own words, cash is deployed into situations that have: “inefficiency-inducing special situation characteristics and opportunities for self-help or accretive capital deployment”. Marble Arch and Hound have shown a lot of similarity in their stock picking over the years.
Marble Arch’s top five winners for 2014:
Marble Arch’s top five positions at the end of 2014:
