Vinik Returns Money to Investors
By Christopher Noble
BOSTON (Reuters) - Jeff Vinik, former manager of Fidelity Investments' Magellan
fund, said on Thursday he was shuttering his $4.2 billion hedge fund, making him
the latest well-known money manager to pull back or quit the markets.
Vinik, whose Vinik Asset Management fund has returned an annualized 52.9
percent since it opened in November 1996, said in his first interview since leaving
Fidelity, he wanted to spend more time with his family.
The 41-year-old money manager has three children and a fourth on the way.
His decision to close the fund by Dec. 31 has nothing to do with market
conditions, he said in a statement.
``I think there will always be ways to make money in the market,'' he told
Reuters.
In an earlier statement, Vinick said: ``Obviously, a decision like this take
considerable thought and planning, but the volatility in the U.S. stock market did
not enter into our thinking.
``In fact, given our conservative outlook on this year's market, our portfolio has
been only modestly invested and extremely liquid for several months,'' the
statement said.
He declined to say exactly when he pulled out of the market, but said his
investors were unscathed by the rout in technology stocks this year.
``We were able to sidestep the decline in technology earlier this year and more
recently,'' he elaborated in the interview. ''As good as the fundamentals are, we
thought the values were a little out of our reach.''
He declined to be more specific about the fund's positioning and refused to make
forecasts about the market's performance in the months ahead.
Year-to-date, the fund is up 45.6 percent after fees.
Vinik's departure follows the high profile exit earlier this year of Julian Robertson,
who closed his Tiger Management company and its once-high-flying hedge funds
after they lost billions. Steep losses also drove world-famous hedge fund investor
George Soros to pull in his horns.
Soros reshuffled management and abandoned the risky macro- economic bets for
which he was famous.
Vinik's fund, which he called a ``growth at a reasonable price'' portfolio, was
mostly a stock fund and used a value approach, seeking out firms that appeared
under valued based on financial ratios and investing heavily in them.
``It is, as it's always been, a go-anywhere fund,'' Vinik said. ``We look for
companies that are undervalued and we sell them when we think they've reached
full valuation.''
The strategy paid off for Vinik's small group of backers who saw their initial
investments grow more than fivefold.
Vinik earned fame, and then notoriety, as a young and precocious money
manager at Fidelity Investments, where his rapid rise culminated in his managing
the Magellan Fund, then the world's largest mutual fund, from 1992 to 1996.
Vinik left Magellan, billed as an equity fund, after a large, and ultimately
money-losing bet that bonds would outperform stocks.
His departure in May 1996 was seen by some observers as the end of an era of
freewheeling fund management at Fidelity. Since then the privately held firm has
forced its money runners to keep funds invested according to guidelines laid out
in their prospectuses.
Several months later he started his fund, which returned a net 75.7 percent in
1997, its first full year of operation.
Vinik ran the fund with another Fidelity veteran, Mike Gordon, and on average
they held about 350 companies at a time in the portfolio.
``We kept it simple. Our portfolio was almost exclusively in U.S. stocks and we
didn't use futures, options or derivatives, so our leverage was low,'' Gordon said in
the statement. |
