In Client Letter, Robert Karr Explains Decision to Close Joho

January 30, 2014   Stephen Taub

Robert Karr announced he is closing down his 17 year-old Joho Capital and returning all outside money to investors and becoming a family office at the end of the first quarter.

In a fascinating, heartfelt seven-page letter to clients dated January 30, the Tiger Cub said he is shutting his New York City-based firm to spend more time with his children, stressing he made this decision "with mixed emotions."

"This is something I have been considering for the past few years with the hope that when we ended, it would be on a positive note and we would be able to reward our investors for their loyalty and our colleagues for their very hard work," Karr writes. "Since the financial crisis, solid returns have been more challenging, but with a strong 2013, I feel now is the time."

In 2013 Joho Partners and Joho Fund gained 30.3 percent net of fees, which Karr calls one of the best in the firm’s history. Since its November 1996 inception, the fund gained 20 percent or so.

The firm has a total of $4.9 billion in its long-short hedge funds and another $243 million in long-only funds.

"Over the past 17 years, my energy and focus centered around three priorities: my family, our foundation and Joho," Karr continues in a letter that reads like a confessional that others might be reluctant or afraid to publish. "Joho, as might be expected given the nature of the industry, has often received the greatest share of that energy."

Joho specializes in investing in Japan and other Asian markets. In the letter he says on a typical day he wakes up at 5 A.M. to see how Asian markets closed, then spends a full day in the office, then and trades the morning session of the Asian markets at night. "I have loved the work, but it is difficult to turn off," he admits.

Karr goes on to explain that the key to Joho’s success has been the firm’s stock selection and focus on the long-term outlook for companies. This required him to spend at least two months of the year in Asia visiting the operations of his holdings. "These trips were draining but necessary to stay on top," Karr admits.

He explains that his wife has "carried the heavier burden for parenting" his two teenage children who are a few years from college. He says before they leave he wants to spend more time with them.

Karr also gives a nod to his grandfather, Chum, who began teaching him about the stock market when he was 15 and helped him to find the work he loved. Karr says they collectively invested the money he earned, "weeding his exuberant Pacific Northwest garden."

In the letter, Karr also discusses the challenges and pressures to annually fund his foundation he created 10 years ago. He talks about the inequalities in the K-12 public education system and how his foundation has focused on "giving every child access to high-performing public schools and high-quality teachers."

He adds that in the future he wants to "spend more time helping to ensure that all children have the ability to pursue life-long happiness, which is difficult without an education."

As for investing, Karr says he remains bullish on Japanese equities and believes the Abe administration "will successfully orchestrate a mini-asset bubble over the next few years." He says the big challenge will come when "meaningful inflation returns and the BOJ [Bank of Japan] starts to taper."

Meanwhile, he says he plans to reduce his current position of 67 longs and 55 shorts to roughly 20 apiece.

He then plans to invest some money with other managers and to seed some of Joho’s analysts, who will initially invest internal capital only and over time may seek outside capital.

"Although Joho’s change may not sit well with everyone, I have strong conviction that now is the time," Karr concludes. "My top three priorities are all asking for more of me, and I am not getting any younger. As we age, time becomes our most precious commodity, and I look forward to having more of it. More time to see life through my boys’ eyes, expand my investment universe, try new recipes with Suzanne, read more books (serious and silly), help less-fortunate kids find happiness, learn more about other social causes, travel the world seeking adventure and culture, explore new music, find new athletic endeavors, and basically smell the fresh air and enjoy the moment."


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