TAMPA — When he announced plans to relaunch his hedge fund, Tampa Bay Lightning owner and longtime financier Jeff Vinik expected to raise $2 billion to $3 billion in a month or two.
Instead, Vinik, 60, initially raised about $465 million, which is not a lot in the hedge fund game, and little money has come in since. The fund now has about $550 million under management.
So on Wednesday Vinik said the fund will close Nov. 15, and its 25 to 50 investors will get their money back.
“There was no visibility of more money coming in the door, I’m frankly disappointed to say,” he said in a telephone interview. “We never got close, and there was no sign of us getting close.”
His disappointment stands in contrast to his optimism in January, when he said, "after six years of running my own money, the fire in my belly still burns.” So he went to New York to tell CNBC that Vinik Asset Management, dormant since 2013, would re-open in March.
But for the fund to succeed, it needed to operate at a significantly bigger scale, he said, and it didn’t make sense for someone his age to spend two more years trying to build it to that level. Vinik said he works an average about 100 hours a week, and was spending about 75 hours a week managing the hedge fund. Unlike the Lightning and his other business ventures, he did not delegate day-to-day management of the fund to trusted executives.
After announcing the relaunch, Vinik had “at least” 75 meetings with prospective investors. He said he immediately learned that the hedge fund business had changed a lot in six years.
Today, he said, potential investors take much longer to make up their minds. Because of lackluster results over the past five years in so-called “long-short equity hedge funds,” the kind that Vinik is running, decision-makers “are looking for any excuse not to put money in.”
And too often, they weren’t the same decision-makers Vinik had worked with before. Most knew him by reputation, but “that wasn’t enough for them to get comfortable," he said." They needed a good amount more time and see a good amount more performance.”
“The ability to raise money quickly, which I had been able to do a couple of times in my career, is no longer there,” he said. “There is a much longer vetting process involved with institutions. They also want to see a track record related to our startup."
Despite the difficulty raising money, Vinik said, “I loved managing the money.”
In a letter to investors, he said his fund was up 4.8 percent on a net basis as of Sept. 30, while other equity hedge funds were up less than 1 percent.
It’s impossible to summarize what the fund invested in, Vinik said, because he traded stocks often and tried to be opportunistic. But since late June, he said, he said has largely bought “the beaten-down, economically sensitive stocks that people were so pessimistic on, and shorting on the other hand the momentum stocks and defensive stocks that people were hiding in because of their fear of a bad economy.”
“This is the sad part: I feel like my portfolio was perfectly situated for the upcoming months,” he said. As a result of the fund closing, about a half-dozen employees will be out of a job.
From the start, Vinik’s hedge fund was not an opportunity open to anyone who wasn’t already a wealthy and sophisticated investor — an “accredited investor,” in the language of Wall Street.
Under federal securities regulations, accredited investors include individuals with a net worth of at least $1 million, not including their home or debt associated with their home, or an annual income of more than $200,000 by themselves or $300,000 with their spouses.
But even being an accredited investor might not have been enough. Because most hedge funds charge so-called “performance fees” based on how much the capital in the fund grows, their investors have to be what federal regulators call “qualified clients.”
Qualified clients must have a net worth of at least $2.1 million, not including their homes, or have at least $1 million invested in the fund, or be what’s known as a “qualified purchaser.” For individuals, that means having at least $5 million in investable assets.
A graduate of Duke University’s School of Engineering and Harvard Business School, Vinik was hired at 33 to run Fidelity’s Magellan Fund, then the nation’s biggest mutual fund. He was known for capitalizing successfully on big swings in the market, but a 1995 move into bonds backfired when stocks rose.
In 1996, he left Fidelity and started his own hedge fund, which he moved from Boston to Tampa in the summer of 2012, two years after he bought the Lightning.
The hedge fund posted 17 percent annualized returns, but Vinik shut it down in May 2013 and returned billions of dollars to investors after a restructuring of the investment team led to some disappointing results. In a letter to investors, Vinik said then it was a “difficult decision” to close the fund after a rugged 10-month stretch under the new investment team. The fund’s value dropped nearly 5 percent, partly because of a big bet on gold mining that didn’t pay off, according to a report at the time from Dow Jones.
Meanwhile, Vinik’s ownership of the Lightning had led him to start buying property around Amalie Arena. Along the way, he teamed up with Cascade Investment, the private capital fund for Microsoft billionaire Bill Gates. Together, they launched Water Street Tampa, a 53-acre project that will include a new home for the University of South Florida Morsani College of Medicine and Heart Institute, three Marriott hotels, downtown Tampa’s first new office towers in more than 25 years, four residential projects and Sparkman Wharf, a re-invention of the old Channelside Bay Plaza entertainment complex.
In addition to his other business ventures, Vinik is part of FBN Partners, a group of local investors who since 2017 have loaned a total of about $15 million to Times Publishing Co., which owns the Tampa Bay Times.
Contact Richard Danielson at email@example.com or (813) 226-3403. Follow @Danielson_Times