Valeant Responsible For 60% Of Loss, As Tourbillon Capital Laments The Year That Was

For Jason Karp’s Tourbillon Capital Partners, 2016 was a “short range failure” but the firm’s long-term goals and investing process appear intact. In the fourth quarter the Tourbillion Global Master Fund (TGMF) subtracted -1.8% from performance and finished 2016 down -9.2%, a letter to investors reviewed by ValueWalk shows. Karp, “disappointed,” called the 2016 performance “the worst year in my 18-year career” and “not a reflection of who we are or the process that has led me to significant compounded returns and wealth over my career.”

2016 Hedge Fund Letters

Tourbillon Capital thinks 2016 was the year of the unpredictable

The former SAC Capital and Carlson Capital portfolio manager, with nearly $3.7 billion now under management at Tourbillion Capital, notes the difficulty of analysis when different segments of society lose touch with each other and reality.

It is difficult to determine exactly how historians will categorize 2016. From Karp’s perspective, the year from Brexit to Trump highlighted “generational surprises” that few in elite quarters were aware existed.

“The intelligentsia grossly underestimated the populous in their motives to choose an ‘irrational outcome’ due to a latent desire for blunt change,” Karp wrote. From his perspective, 2016 was like 2011 in that “so many surprises” resulted in it being “all too easy to make bad decisions.”

Psychological studies have shown that the more opportunities there are for important decision points, the more likely it is that humans will make more bad decisions. Case in point – pollsters and the media were predicting outcomes with high degrees of certainty that then proved to be wrong. Moreover, most market strategists and “experts” also previewed that either Brexit or Trump winning would be disastrous for the markets – both predictions turned out to be completely wrong.

Do fund managers who profited off the Trump rally deserve a pat on the back or was it luck?

It is often a trader’s lament to look back on performance and consider what might have been. For Karp and his Tourbillon Capital team, looking back on the wreckage of their worst year in history, it was really only a brief moment in time that derailed performance. Most of the negative performance was generated in the first quarter, when the market sell off – due to “a growth scare” that resulted in plunging oil prices and concerns over China and a Fed rate hike.