In a candid letter to investors, hedge fund manager Larry Robbins apologized for a year-to-date loss in his flagship fund of more than 20 percent through Monday's close, writing that "I've failed to protect your capital, and mine…despite a flat market."
Robbins, who is known for his at-times wildly successful calls in the health-care sector at Glenview Capital Management, wrote that he continues to believe his company's health-care investments are lower risk and of higher potential than the broad market.
Still, he said, the gyrations of August, which he regarded as "rotational" rather than "systemic," and his misperception that Glenview's health-care stocks at the time were "a rock-bed of strength," look arrogant in retrospect. Going into the period, both Robbins' Glenview fund and a sister investment vehicle were betting on managed care, hospitals and pharmaceutical stocks, with smaller exposures in veterinary and other health care-related stocks.
But an array of factors — including scrutiny of drug price hikes, the political climate, hedge fund repositioning and "ordinary" volatility in hospital earnings — have bedeviled health-care stocks of late, he noted.
Another key factor: questions about the accounting and operational practices of "one or more high-profile consolidators," a possible reference to Valeant, which faced a 35 percent plunge in the market last week amid concerns about its specialty pharmacy business.
"While there is merit to each of these concerns," Robbins wrote, "in aggregate we remain highly confident that these are transitory stock price factors that will self-correct because the underlying profit stability and growth, capital allocation, valuation and fundamental outlook all support meaningful equity price appreciation for the coming year and years."
A Glenview official declined to comment on the details of the firm's performance. But one investor noted that during the two-year period after a large performance decline, or drawdown, like this year's, some of Glenview's strongest returns have historically followed.