https://www.wsj.com/amp/articles/energy-focused-hedge-fund-brenham-capital-to-close-1543591153
Fund, which has lost money the past two years, was hit hard by recent moves in oil and energy stocks
Rachael Levy Nov. 30, 2018
Dallas-based hedge fund Brenham Capital is closing, a casualty of what founder John Labanowski called “some truly bizarre stock action.”
Brenham made bets on small and midcap energy stocks. Brent, the global benchmark, entered a bear market this month—defined as a 20% drop from a recent peak. Energy investors have also been whipsawed by volatility outside the oil market.
The closure is the latest in a string of hedge-fund shutdowns.
For Brenham Capital, the fund’s strategy toward energy stocks was no longer working, Mr. Labanowski said in a letter sent to clients seen by The Wall Street Journal.
“Arriving at this decision was gut-wrenching but I believe it is the right thing to do,” Mr. Labanowski said. “Brenham’s investment strategy isn’t working in this environment and I’m no longer willing to risk investor capital in such a setting.”
He added, “I continue to witness some truly bizarre stock action in the energy sector that is hard for me to make sense of and I’m not sure when this situation will improve.”
Brenham lost 8.5% in October, according to a client document. The fund has lost money for the past two years, down 14.7% this year through October and 10.5% last year, according to the document. It was a steep turnaround for the fund, which previously had posted double-digit yearly gains since its 2012 launch, according to the document.
As losses mounted, some investors pulled money, which Mr. Labanowski described as distracting.
“I’m surprised by how difficult it has been for me personally to maintain a clear head during this process,” he wrote in the letter. “My attempts to stabilize the business have required a tremendous amount of time and energy and it is difficult to maintain the thoughtful approach to portfolio management that is needed in order to effectively steer through this volatile market.”
The fund managed $1.2 billion at its peak in December 2016, said Dawn Blankenship, the firm’s director of investor relations. The firm’s director of research, Stephen Thomas, plans to start another fund with Brenham team members, she added.
The end for Brenham comes after a slate of fund closures in the past two months. Partly driving the closures has been a multiyear re-evaluation of hedge funds by fund managers and their investors.
Some funds have closed as skepticism has increased about the value of paying their famously high fees. Hedge funds often charge a 2% management fee and a 20% cut of performance gains. Others have been hurt by poor performance relative to a stock market that has notched nearly a decade of gains.
Fund, which has lost money the past two years, was hit hard by recent moves in oil and energy stocks
Rachael Levy Nov. 30, 2018
Dallas-based hedge fund Brenham Capital is closing, a casualty of what founder John Labanowski called “some truly bizarre stock action.”
Brenham made bets on small and midcap energy stocks. Brent, the global benchmark, entered a bear market this month—defined as a 20% drop from a recent peak. Energy investors have also been whipsawed by volatility outside the oil market.
The closure is the latest in a string of hedge-fund shutdowns.
For Brenham Capital, the fund’s strategy toward energy stocks was no longer working, Mr. Labanowski said in a letter sent to clients seen by The Wall Street Journal.
“Arriving at this decision was gut-wrenching but I believe it is the right thing to do,” Mr. Labanowski said. “Brenham’s investment strategy isn’t working in this environment and I’m no longer willing to risk investor capital in such a setting.”
He added, “I continue to witness some truly bizarre stock action in the energy sector that is hard for me to make sense of and I’m not sure when this situation will improve.”
Brenham lost 8.5% in October, according to a client document. The fund has lost money for the past two years, down 14.7% this year through October and 10.5% last year, according to the document. It was a steep turnaround for the fund, which previously had posted double-digit yearly gains since its 2012 launch, according to the document.
As losses mounted, some investors pulled money, which Mr. Labanowski described as distracting.
“I’m surprised by how difficult it has been for me personally to maintain a clear head during this process,” he wrote in the letter. “My attempts to stabilize the business have required a tremendous amount of time and energy and it is difficult to maintain the thoughtful approach to portfolio management that is needed in order to effectively steer through this volatile market.”
The fund managed $1.2 billion at its peak in December 2016, said Dawn Blankenship, the firm’s director of investor relations. The firm’s director of research, Stephen Thomas, plans to start another fund with Brenham team members, she added.
The end for Brenham comes after a slate of fund closures in the past two months. Partly driving the closures has been a multiyear re-evaluation of hedge funds by fund managers and their investors.
Some funds have closed as skepticism has increased about the value of paying their famously high fees. Hedge funds often charge a 2% management fee and a 20% cut of performance gains. Others have been hurt by poor performance relative to a stock market that has notched nearly a decade of gains.
