The 400% Man!

[steph]

He didn't blow up his fund.  There is no leverage.  Just 3 years in a row with subpar performances.  After more than 15 years of stellar results this seemed to be too hard for him mentally.  He had too much stress.

When you are very concentrated (which you have to be if you want to beat the markets by a high margin), you have to accept very painful periods.  But it is not easy when you manage a 'public' fund.

[Guest]

I'm really sorry to hear this. Allan and Ben have both been really nice to me. I haven't had a lot of contact with them (I've emailed/messaged) them both over the years but every time they've been great (especially for a random internet guy like me). I really like these guys and hope the best for them and for Allan's health.

[WneverLOSE]

It would be nice if someone can link info why they think he blew up his fund (Nothing in Google I could find) or that he has medical problems.

I can see that the website is down but there are no SEC fillings since the 13F was filled.

 

It doesn't make any sense if he blew up his fund to transfer LPs to Brave Warrior (since all the money is gone...)

 

I have seen a post on reddit from 5 months ago claiming he had a ski accident but he was active since then so I don't think it has anything to do with it (or if it is even true...)

 

I like his letters and have followed some of his investments, did well on some and really bad on others but I didn't blow up and my performance is much worse than his (so only leverage is an option but I remember he said on one of his letters that he only used it during the panic and I thought he didn't use it anymore)

 

 

[AzCactus]

I'll second the above post.  Pretty confused that there's no news at all about this.  It's totally possible that's how Allan wants things given this ending, but it does seem strange that he is shutting things down while prices are also down. 

[mhdousa]

From his letter:

Dear Arlington Investors,

First, Ben and I would like to extend our thoughts/hopes that all partners are healthy and safe during this incredibly challenging time. I’m writing with an important and difficult update.

In January I made the hard decision to step down from managing Arlington’s portfolio sometime this year. This was not an easy decision, as I still love business and investing and I’m not that old; however, my doctor, wife, and family all encouraged me to step down in the interest of my long-term health. I made this decision with the belief that it was the responsible course of action.

Since making the decision to step down, Ben and I examined the mechanics of dissolution and also explored various options to provide longevity to Arlington and avoid disruption to LPs. We considered merging with a colleagues fund that would preserve Arlington but allow me to step back, while adopting a chairman of the board-like role. Ultimately, we decided that dissolution would be best and planned to wind down the fund over 6-9 months. On the heels of our decision, the coronavirus pandemic engulfed markets and everyday life, making our decision difficult, complex, and stressful. Unfortunately, our experience during this unprecedented market drawdown deviates from our historical performance in bear markets, as we’re lagging the major indices by a wide margin.

I’m very disappointed with our recent results and have spent many sleepless nights analyzing what we could have done different or better. Given the unusual market environment, we’ve reconsidered our initial plan to proceed with a traditional dissolution process. However, it’s not practical to continue on with the current structure long term, so we’ve thought about various options for LPs to consider.

While perhaps unorthodox, we’ve worked to create a sensible alternative to redeeming in cash or “in- kind” via a sub-advisor arrangement with Brave Warrior Advisors. The three options to consider are as follows:

• A sub-advisor arrangement with Brave Warrior Advisors. Brave Warrior is a $2.3 billion dollar investment manager founded by Glenn Greenberg out of NYC. Glenn’s 36-year track record is elite, with few peers. Brave Warrior shares a similar investment philosophy and they are familiar with our top holdings. We’ve arranged for this to be simple and not disruptive to LPs by allowing Brave Warrior to assume investment management of our funds at a future date.

• Redemption in cash.

• Redemption “in-kind” via shares.

We plan to discuss these options with LPs further over the next 3-4 weeks. Based on those discussions, we will then follow up with full details of options, timeline, and next steps.

[AzCactus]

Really sad to see this.  Genuinely thought he had a good shot at being a Klarman/Buffett. 

[Jurgis]

The dissolution during a market drop/pandemic is quite unfortunate. Even with all the effort I'd guess it's hard to make decisions what positions to keep/sell/buy when dissolution is going to happen in short term. There's likely losses and opportunity losses due to this situation. I can see "sleepless nights" there.  :( Tough luck. Best wishes to all involved.

[jeffsreng]

I wish him well and great health.  I've learn a lot from him.  Thank you so much.  Best wishes.

 

https://www.dropbox.com/sh/6u8mzy1k7sh94f3/AADhsCTrGrLdwMdECr-oUtH1a?dl=0

 

http://minesafetydisclosures.com/fund-shareholder-letters

[indythinker85]

Can anyone who has more info DM me?

[WneverLOSE]

mhdousa thanks for informing us, we really appreciate it.

 

I wish him health and a strong comeback in the future.

Really sobering to think about how fragile things are, a great money manger I looked up to for years is having medical issues and the CFO of a common investment we share (JEF) has died from COVID-19  :'(

[bilo]

Good for him.. The hero worship and desire to be or see, "the next ..." is unhealthy and pointless.  He has made a few hundred million, really no point in operating a fund with all the hastles and reporting requirements,  when you can sit back and pick your spots while enjoying wealth and family.  My two cents.

[Peregrine]

From what I recall, he used some margin as well.

[Charlie]

It's much more simple to own just Berkshire and enjoy life.

There's a diminishing marginal utility to earning money if you have already enough money

and especially if you don't enjoy the work or the work is unhealthy.

I liked his focus. One of the best Buffett-Imitators.

Anyone know his long-term track record?

 

 

 

[Vish_ram]

His portfolio should have lost 40-50% in Q1-2020.

 

Alliance data, Spectrum, Cimpress etc lost more than 50%.

 

I cannot think of any value investor who has outperformed the S&P 500 in last 10 years.

 

I hope he feels better

[GregS]

IIRC, he used margin to increase the BRK position which is why it's so large. 

 

I wish him the best of luck and good health.  I know I wouldn't want to quit right now being down as much as he likely is even if that was the plan, but I suspect investors forced the issue. 

 

I think you can be a concentrated investor or you can raise funds through hagiographic media articles but I think it's very hard to do both for long.

 

I expect he'll be back doing something in due time.  Hard to keep guys like this away from the game.

[merkhet]

IIRC, he used margin to increase the BRK position which is why it's so large.

 

I think that was a few years back. My understanding was that the fund was no longer levered the last few years, but I could be wrong.

[jeffsreng]

Once a business investor will always be a business investor.  He will always be in the game.

[skanjete]

It's a pity, really.

I had a lot of respect for him.

 

But now, his excellent long term track record will be greatly diminished because of an ill-timed exit at the worst possible time.

[opihiman2]

I'm hearing new rumors that it's likely he's been re-levering, and to be frank, that actually explains why he's dissolving the fund and has had sleepless nights and "health" issues.  I've looked at the last quarter filings, and it just doesn't explain why you would dissolve the fund even if the draw-down is calculated to now about 40%.  I'm thinking if he did lever up, there's more worries than fund losses.  He'll be facing lawsuits and SEC inquiries. 

 

I hope this guy never comes back.  He'll be another hack job like Ackman, Tilson, and a whole host of other frauds that closed up shop, and re-opened to wipe out their bad years.

 

[AzCactus]

I'm hearing new rumors that it's likely he's been re-levering, and to be frank, that actually explains why he's dissolving the fund and has had sleepless nights and "health" issues.  I've looked at the last quarter filings, and it just doesn't explain why you would dissolve the fund even if the draw-down is calculated to now about 40%.  I'm thinking if he did lever up, there's more worries than fund losses.  He'll be facing lawsuits and SEC inquiries. 

 

I hope this guy never comes back.  He'll be another hack job like Ackman, Tilson, and a whole host of other frauds that closed up shop, and re-opened to wipe out their bad years.

 

Tell us how you really feel  ::)

 

 

[kab60]

Anyone here have any more details as to what happened?

 

Looking at the Q1 portfolio update, it seems he would either have been levered and getting margin calls or hit by redemptions - both at the worst possible time. His massive selling in Q1 probably explains some of the crazy drawdowns many of his holdings had. Really terrible timing because some of his recent picks, like Wayfair in Q1 and Covetrus the quarter prior, have been huge winners. Trying to figure out if there's anything to learn from this - other than sticky money goood, leverage baaad.

[muscleman]

I'm hearing new rumors that it's likely he's been re-levering, and to be frank, that actually explains why he's dissolving the fund and has had sleepless nights and "health" issues.  I've looked at the last quarter filings, and it just doesn't explain why you would dissolve the fund even if the draw-down is calculated to now about 40%.  I'm thinking if he did lever up, there's more worries than fund losses.  He'll be facing lawsuits and SEC inquiries. 

 

I hope this guy never comes back.  He'll be another hack job like Ackman, Tilson, and a whole host of other frauds that closed up shop, and re-opened to wipe out their bad years.

 

Could you tell me where you heard these rumors? If he did not lever up, then he would have survived the COVID crash and be fine right now. But if he had levered up, it would be strange for him to say in his letters that he will dissolve the fund in 6-9 months, because with margin calls, he does not have 6-9 months to dissolve.

 

[Spekulatius]

I'm hearing new rumors that it's likely he's been re-levering, and to be frank, that actually explains why he's dissolving the fund and has had sleepless nights and "health" issues.  I've looked at the last quarter filings, and it just doesn't explain why you would dissolve the fund even if the draw-down is calculated to now about 40%.  I'm thinking if he did lever up, there's more worries than fund losses.  He'll be facing lawsuits and SEC inquiries. 

 

I hope this guy never comes back.  He'll be another hack job like Ackman, Tilson, and a whole host of other frauds that closed up shop, and re-opened to wipe out their bad years.

 

Margins calls get executed the same day, but it takes time to wind down a fund.

 

Could you tell me where you heard these rumors? If he did not lever up, then he would have survived the COVID crash and be fine right now. But if he had levered up, it would be strange for him to say in his letters that he will dissolve the fund in 6-9 months, because with margin calls, he does not have 6-9 months to dissolve.

[muscleman]

I'm hearing new rumors that it's likely he's been re-levering, and to be frank, that actually explains why he's dissolving the fund and has had sleepless nights and "health" issues.  I've looked at the last quarter filings, and it just doesn't explain why you would dissolve the fund even if the draw-down is calculated to now about 40%.  I'm thinking if he did lever up, there's more worries than fund losses.  He'll be facing lawsuits and SEC inquiries. 

 

I hope this guy never comes back.  He'll be another hack job like Ackman, Tilson, and a whole host of other frauds that closed up shop, and re-opened to wipe out their bad years.

 

Margins calls get executed the same day, but it takes time to wind down a fund.

 

Could you tell me where you heard these rumors? If he did not lever up, then he would have survived the COVID crash and be fine right now. But if he had levered up, it would be strange for him to say in his letters that he will dissolve the fund in 6-9 months, because with margin calls, he does not have 6-9 months to dissolve.

 

If he gets margin calls, then he had to blow it out on the same day. Then the fund is probably already in cash right? Why does it still take another 6-9 months to dissolve?

 

Is it confirmed that he started using leverage again right before the COVID crash, which caused this tragedy? I feel so sorry for him.

[Guest]

Does anyone know what Allan and Ben are up to these days? Also curious what the final performance ended up being from inception to end period. I really liked these guys so I've always been curious.