John Paulson Cub Sees “Hundreds of Billions” In Tech Industry Consolidation And Potential Apple Purchase Of DisneyRupert Hargreaves
When Margate Capital launched the fundraising for a long/short equity fund at the beginning of last year, the fund attracted plenty of attention thanks to the fact its managing partner and chief investment officer, Samantha Greenberg was a John Paulson cub and one of the hedge fund industry’s few female hedge fund managers.
Greenberg was rated as one of 2016’s hedge fund rising stars by Institutional Investor magazine at the beginning of the year after receiving seed capital of $130 million from New York-based asset manager Ramius. Along with the capital, Ramius also took an equity share of the business. Greenberg’s resume promised big things. After working for Goldman Sachs’ special situations group, she joined John Paulson in 2009. After leading the firm’s media and consumer investment teams for several years, she was promoted to partner in 2011.
Margate Capital officially began trading on 1 August 2016, and since then the fund has produced attractive returns relative to its peers. According to Margate’s fourth-quarter and end of year 2016 letter, a January 10th 2017 copy of which has been reviewed by ValueWalk, the fund’s long/short strategy returned 4.4% gross during Q4, compared to a return of 3.8% for the S&P 500. From inception till the end of the year, Margate produced an estimated return of 5% net on its DAY 1 units and 4.6% net on FOUNDERS units. Over the same period, the S&P 500 has returned 4%, while the equity long/short HF performance for the same period was only +0.28%, per data from Morgan Stanley Prime Brokerage.
During the third quarter, the fund averaged 26% net exposure and 120% gross exposure. Average long exposure was 74%, and average short exposure was -48%. Long positions added 8.7% and short positions subtracted 3.3%. The team’s targeted gross exposure is 150% to 180% and is still building out the portfolio after launch.
Margate Capital: Tech Industry Is On The Cusp Of Wave Of Consolidation
Margate Capital is a tech-focused fund. Greenberg believes that the technology industry is on the cusp of a substantial wave of consolidation and Margate Capital's position to benefit from this. Companies targeted are those “with attractive valuations and expected positive earnings revisions, but also free optionality as these companies sit in the “sweet spot” of size and desirability for strategic and financial buyers.”
Greenberg points to three major developments, which could be the catalysts that drive this major industry consolidation:
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