John A. Thaler’s JAT Capital Management LP fell 17 percent this year on wrong-way bets on stocks including those of consumer companies, according to two people familiar with the matter.
As a result, New York-based JAT, which has $2.3 billion in assets, plans to focus more on technology, media and telecommunications companies, said the people, who asked not to be identified because the information is private.
JAT, which rose 17 percent last year to rank among the top 20 hedge funds in a Bloomberg Markets survey, uses a long-short strategy that seeks to profit by betting on rising and falling stocks. The firm’s wagers against stocks backfired in the first quarter as the U.S. market rose 12 percent through March 31.
“The performance of the funds over the last seven months has been a great disappointment to the team and to me personally,” Thaler said in a first-quarter letter sent to investors May 15, a copy of which was obtained by Bloomberg News. “After any period like this, we are left to examine the drawdown and review if a change should be made.”
Steve Bruce, a spokesman for JAT, declined to comment on the returns.
JAT had allocated about 28 percent of its assets to consumer companies, which contributed a 9.1 percent loss as of April 1, according to the letter. The firm has since reduced that portion to less than 10 percent of the portfolio and reallocated the money to technology, media and telecommunications, the people said.
“The consumer sector alone has contributed 81 percent of the total year-to-date loss through April, has been a significant contributor to the overall volatility of the funds, and perhaps most importantly, has represented a meaningful opportunity cost for me as it relates to my own time allocation,” Thaler said in the letter. “We have made the decision to allocate away from consumer going forward.”
Tempur-Pedic (TPX:US) International Inc., JAT’s largest long position as of March 31, according to regulatory filings, has lost 51 percent since the start of the year through today as the company lowered its full-year profit and revenue forecasts. The filings don’t show non-U.S. securities. JAT has pared its shares in the Lexington, Kentucky-based company since the end of the first quarter, part of its shift out of consumer companies, the people said.
Thaler, 36, founded JAT in 2007 after leaving Shumway Capital Partners LLC, where he most recently managed a portfolio of telecommunications, media and technology stocks.
JAT rose 11 percent in 2010 and 20 percent in 2009. The firm lost 5.9 percent in 2008 and 0.7 percent in November and December 2007.
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