The hedge fund manager who has teamed up with Microsoft
Corp. CEO Steven Ballmer to buy the Sacramento Kings basketball
team and move it to Seattle accomplished something most other
stock pickers didn’t in the first quarter: He lost
money on his long positions during a booming bull market in
Christopher Hansen’s Valiant Capital
Management, which we earlier reported lost 10 percent on a
gross basis and 8.70 percent net in the first quarter, lost
3.52 percent alone in its long portfolio in the first quarter,
a period when the S&P 500 rose by 10.6 percent, according
to Valiant’s March performance report, obtained by
Institutional Investor’s Alpha. This
means Valiant’s longs lagged the broad market by
more than 14 percentage points.
In its performance report, the firm warns that it is
"inappropriate" to compare its results to the S&P 500, MSCI
World Index or "any other market index," insisting that it is
not aware of any index that would be directly comparable.
However, it is safe to assume that even most custom-constructed
stock indexes posted gains in the first quarter, and
double-digit returns at that.
Hansen’s horrible first-quarter performance
comes on the heels of a 7.44 percent net loss in the fourth
quarter, putting the firm down more than 16 percent in the past
six months, having lost money five of the most recent six
quarters. Neither Hansen nor a spokesperson from the National
Basketball Association returned calls seeking comment.
There is considerable interest in Valiant’s
missteps. For one thing, Hansen’s is one among
several dozen hedge funds whose roots can be traced to Julian
Robertson Jr.’s legendary hedge fund firm, Tiger
Management. Hansen is unofficially called a Tiger Grandcub
because he spent seven years working for Tiger Cub John Griffin
of Blue Ridge Capital. In 2008, he started Valiant, a global
long-short equity hedge fund that now manages $2.44 billion,
down from $2.8 billion at year-end, according to the
firm’s internal documents. Despite its recent
travails, Valiant, which has a four-year lockup, has compounded
at better than 13 percent net since its August 2008
Hansen’s investment troubles are playing out
simultaneously with his bid to buy 65 percent of the basketball
team. The NBA has held up its approval of the offer —
which was recently raised to $357 million from $341 million
— as it considers a competing bid that would keep the
team in Sacramento. On Thursday the Sacramento Bee
reported that the committee vetting Hansen’s and
the competing offer for the Kings will discuss the situation on
a conference call on Monday, April 29, and a final decision
will not be made until May 8 at the earliest.
In any case, according to Valiant’s report in
the first quarter, the fund’s liquid portfolio
lost about 10 percent, while the side pockets, which account
for about 15 percent of the fund’s total assets,
lost a mere 0.10 percent. The liquid portfolio had a net
exposure of 34.58 percent.
Valiant, no doubt, was hurt badly by its big stake in Apple,
its largest position at more than 9 percent of the liquid
portfolio. Apple’s shares plunged about 17 percent
in the quarter.
Otherwise, Valiant’s top longs actually fared
well. Its next three largest long positions — Tiger
Cub favorites Google and Liberty Global as well as
Anheuser-Busch InBev — posted gains of 12 percent,
16.6 percent and 13.8 percent, respectively, in the first
Facebook, Valiant’s fifth-largest holding, lost
about 3 percent. Altogether, the fund made money on its U.S.
investments. But it lost money on its long exposure to India
— which accounted for 29 percent of its long exposure
— as well as on bets on the Middle East, Africa and
China. Those bets accounted for another 12 percent of long
However, Valiant’s short portfolio lost nearly
4 percent, and its macro portfolio lost 0.17 percent. As of the
end of March, 32 percent of Valiant’s long
portfolio consisted of holdings in information technology
stocks, with another 30 percent in financials. After accounting
for short positions, Valiant had net exposure of 18 percent to
tech and 21 percent to financials.
The performance report also provides insight into the
firm’s illiquid side pocket portfolio. It shows
Valiant’s biggest loss coming from Spandana
Sphoorty Financial, an India-based microfinance institution. An
initial investment of more than $14.8 million is now worth just
However, seven of the 22 current holdings are now worth more
than Valiant paid, including Mission Well Services, a
Houston-based provider of hydraulic fracturing services that
was formed in early 2010, which has nearly tripled in value.
Altogether, Valiant has closed out five side pocket
investments, including Facebook, which was converted into a
public, liquid holding.
Now, the question is whether the Sacramento Kings will
indeed become a personal illiquid investment for Hansen, or
whether his fund’s woes will make it harder for
him to follow through with his deal.