Former hedge fund manager Whitney Tilson, who identifies as a value investor, says there’s not a lot of room for young hedge fund managers to make mistakes these days.
“It’s a tough environment, to be sure,” Tilson told Yahoo Finance in the video above. “Hedge funds, in general, have been underperforming in this bull market. And if anything, that’s why I think young people, who are thinking about getting into the business, need more than ever to have the experience and not be making any mistakes because there’s not a lot of room for error. It’s been a very tough market for value investors, in general, and honestly, I couldn’t figure it out.”
Tilson, 51, closed his hedge fund, Kase Capital, in September after nearly two-decades in the money management business, citing sustained underperformance amid a market characterized by high prices and complacency. Now he’s beginning his next adventure, this time teaching investing to the next generation through a new venture called Kase Learning.
“I love the business, and I feel I want to give back and teach other people all the lessons — both the things I did right and the many things I did wrong. I’ve got a lot of scars on my back,” Tilson said.
Kase Learning will offer three programs. The core program is a bootcamp called “Lessons from the Trenches: Value Investing, Entrepreneurship & Life.” The second is a conference dedicatedly to short-selling with speakers like David Einhorn of Greenlight Capital, Carson Block of MuddyWaters Research, and Andrew Left of Citron Research. He’ll also host a one-day seminar on how to launch and build a hedge fund.
In 2017, hedge funds, on average, delivered returns of 8.5%, the best year for performance since 2013, but still lagging the S&P 500’s 21% return. Last year, approximately 618 hedge fund liquidated, while 545 launched, according to data from HFR. Meanwhile, assets continued to flow into the hedge fund space, with total estimated assets surpassing $3.15 trillion.
Value investors have been vocal about their struggles
On Tuesday, Greenlight’s David Einhorn said it’d been a “challenging environment” for this investment style.
“Despite it being a good year for the market, it was a challenging environment for our investment style,” Einhorn wrote in an investor letter dated January 16. “We do not mimic any index and we think ‘outside the box.’ We have a value orientation and we take comfort from the margin of safety afforded by the low valuations of our long investments. Though most people understood our last quarterly letter as tongue-in-cheek and while we certainly don’t believe value investing is dead, it is clearly out of favor at the moment.”