The Faber Report

Atticus Founder Walks Away, Leaving High Water Mark Behind

Another of the once giant hedge funds is all but closing its doors.

Atticus Capital founder Timothy Barakett, 44 years of age, is shuttering his flagship fundand returning $3 billion in capital to his investors. The roughly $1 billion left, Barakett’s personal fortune, will be managed by him in a so-called “family office”. Atticus will keep its European fund (not managed by Barakett), with roughly $1.5 billion under management, open.

Barakett says the decision was a personal one, driven by his desire to spend more time with his family. I don’t doubt it. But, I can’t help wondering whether Barakett’s exit is also due to the fact that most of the $3 billion he’s returning to investors is below its high water mark.

Barakett, whose fund was down 25% last year and another 6% so far this year, will make no incentive fees (20% of the profits) on the bulk of that $3 billion until he gets his investors back to even. Rather than do that, Barakett is giving them their money back and avoiding having to work for little compensation, while trying to pay his employees a competitive wage.

A spokesman for Barakett says his decision to close down was not prompted by economics.

Regardless, moves like this add to the concern amongst hedge fund investors that their interests are not truly aligned with the people who manage their money. Yes, Barakett put up very strong returns over the last ten years (13%) and by his account, generated $7 billion of profits for those investors. Still, when the tide turned against him and with his assets well below their $20 billion peak in 2007, Barakett is heading for the exit rather than battling to get his investors back to even.

He may have made plenty of money from their money along the way, but at least for this $3 billion, he’s not returning the favor.



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