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April 13, 2016  

Burbank's Passport Slides Amid Market Gains

Passport Capital’s funds again diverged from industry averages in March, this time by posting losses amid gains in the broader market.

The San Francisco operation’s Passport Long/Short Strategy Fund declined 1.3% last month, dragging down the vehicle’s year-to-date return to minus-2.6%. Passport Special Opportunities Fund tumbled 16% for the month, leaving it down 3.9% for the year. And Passport Global Strategy Fund — the largest of the firm’s vehicles — lost 6.6% in March, for a year-to-date decline of 7.5%.

Compare that to the asset-weighted version of the HFRI Equity Hedge (Total) Index, which gained 1.7% in March while finishing the first quarter with a 4% decline.

The opposite happened in 2015, when Passport Long/Short Strategy gained 10.1% while Passport Special Opportunities rose 17.8% and Passport Global Strategy climbed 10.2%. That compared to a mere 1.4% gain for the HFRI index, as many big-name managers got slaughtered amid widespread financial-market volatility.

It’s unclear why Passport wasn’t able to keep up with the market last month. Founder John Burbank typically concentrates his investments within three or four themes, predominantly sticking to long/short plays. Just before the market for subprime-mortgage bonds cratered in 2007, for instance, Burbank effectively sold short those securities by building positions in credit-default swaps — plays that produced about half of his firm’s gains for that year.

Burbank also made money in 2007 on Indian equities, as well as energy-company stocks in the U.S. Last year, he placed lucrative bets against global commodities and emerging-market stocks, according to the Financial Times.

Passport manages about $4 billion overall. In January, the firm told investors that quantitative-investment head Tim Garry would leave in June. Garry joined Passport in 2007 from State Street Global Advisors, and has been managing Passport Long/Short Strategy alongside Burbank. Longtime trading head David Tillman left a few weeks ago.