Go East, Young Man: "Hedge Fund Guru" Jacob Wohl Wants Chinese InvestorsMark Melin
Young Jacob Wohl, the self-proclaimed hedge fund prodigy who ran afoul of industry regulators in 2016, has put the incident behind him. In fact, he is out with new evidence that an unaudited account proves his innocence on charges he misappropriated client assets into his mother’s trading account. That messy period is behind the 19-year old hedge fund manager who claims to have embraced a new “value” investment strategy with a two week time horizon that boasts an “8.78%” Sharpe Ratio. The fund claims to have a Beverly Hills address but after questioning Wohl revealed the location is nothing more than a virtual office, trading operations are at a now undisclosed location. Likewise, claims that he has expanded to Chengdu, China, reveal the address given was that of the local Fairmont Hotel and a US telephone number. Welcome to investing, the “Wohl of Wall Street” style.
Average investors in the future will use an “informational edge”
When looking to the future, Wohl claims that a new generation of investor will find an “informational edge coming from technological sources.” When asked to describe the “informational edge” Wohl offered an indescribable answer, saying traders could place an order at a specific time to get a market benefit over others but did not elaborate on the unknown strategy.
It is unclear the due diligence investors might do on the “informational edge,” but something is apparently working for Wohl, who as a high school student was featured in mainstream media as the hedge fund celeb du jour for achieving outstanding results in stock picking. He switched to managed futures where regulators caught wind of a fraud claim made by a disgruntled investor.
When National Futures Association (NFA) investigators were dispatched to the listed location housing trading operations to conduct a surprise audit in the wake of fraud charges, they were ignored at the door as activity was observed inside the house. A parallel investigation of accounts in the name of Wohl’s registered CTA, Nex Capital Management, revealed unauthorized asset transfers between the registered CTA and a privately held account belong to Jacob Wohl’s mother. The NFA was investigating if Wohl misappropriated customer segregated funds when he resigned as a member of the industry self-regulatory body.
In an interview with ValueWalk, Wohl now claims the missing customer money was the result of trading losses and points to a third brokerage account he says the NFA did not audit. He did not provide ValueWalk any other details about the mystery account.
NFA rules, however, stipulate that a CTA is only allowed to open an account in the name of the investor, if a direct account, or in the name of the CTA fund, if a commodity pool account. The NFA currently has an open Business Conduct Committee case pending against Wohl. Failure to comply could result in Wohl being fined or, in extreme cases, being banned from NFA registration and the ability to manage client assets under certain circumstances. The regulator can refer potential criminal cases to the Commodity Futures Trading Commission and then the US Department of Justice if necessary.
Jacob Wohl, the “value investor” with a two-week time horizon selling options
Wohl, for his part, wants to put his NFA regulatory snafu behind him. Straight off a Vice Daily interview titled “Meet the teen finance guru who makes more money than you,” Wohl now claims he has turned a new leaf. He has become a “value investor.”
When asked to describe his strategy, Wohl doesn’t necessarily discuss price multiples and value relative to anticipated corporate revenues, he rather discusses addiction. It is why he is attracted to tobacco stocks.
After the Trump election, Wohl’s “value strategy” went into action, finding value in addiction stocks and making a two-week “investment” into significant capital gains by selling puts close to expiration. In an interview, he boasted about a 8.78 Sharpe ratio with a 1.94% max intraday drawdown from October 2016 to Friday, but refused to show any performance tear sheet or audited performance statement. There was no performance attribution given relative to the “value” portion of the strategy and the mechanical options selling technique.
Having just hired the son of a Chinese family office manager, the future looks great, Wohl says, as he is “managing more money than ever.” Wohl has his eye on Chinese investors seeking to transfer assets out of the region and into “alternative” investments. Wohl is clearly “alternative.” Meanwhile, the case with the investor misappropriation claim remains an open Business Conduct Committee Complaint at the NFA.