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David Tepper Follows Baupost In Returning Excess Cash To Investors

Tyler Durden's picture





 

Yesterday it was Seth Klarman's Baupost, today it is David Tepper's Appaloosa Managament which is set to return between $1.5 and $2 billion. As reported by II Alpha, Tepper’s firm will return up to $2 billion in an effort to keep the firm’s funds at an optimal size. However, unlike Baupost and various other hedge funds returning cash due to lack of investment opportunities or simply shutting down, "Appaloosa regularly gives back money to investors when it feels it is getting too big. This will be the third straight year Appaloosa has returned capital to investors. Over the years, Tepper has already returned about $8 billion to investors since starting the firm in 1993. The Pittsburgh native’s goal is to keep the fund size at levels he deems optimal at any given time."

More from Alpha:

The firm now manages more than $20 billion. Tepper recently told Bloomberg Television he is up more than 40 percent gross this year. Last year Tepper made $2.2 billion — ranking first on Alpha’s Rich List for the second time in the past four years — after posting a net 30 percent gain.

 

At the start of 2013, Appaloosa was only the 25th largest hedge fund firm in the world. This is remarkable given that Tepper could probably be managing two to three times as much money if he wanted given that Appaloosa is probably the most successful hedge fund firm of all time among those not reliant on a black box or algorithms for trading. Since inception, it has posted a net annualized return of 28.44 percent.

 

What’s more, Tepper has bucked a common problem in the money management world, which is that firms’ returns often decline the more assets they manage. In the most recent five-year period, Appaloosa’s net return was even higher — 30.54 percent. And this does not include 2013, which looks to beat his long-term record. So it was no surprise that Tepper was recently inducted into the Alpha Hedge Fund Hall of Fame.

Naturally, if Tepper is correct as disclosed in his now quarterly appearances in various financial TV media, and PE multiples rise to 20x as a result of Bernanke's largesse, he will certainly be returning far more cash in the future.

 


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Thu, 12/05/2013 - 10:48 | Link to Comment SAT 800
SAT 800's picture

Bullish ! Clearly Bullish. BTFD. / (somebody told me that means sarc.),

Thu, 12/05/2013 - 11:04 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Buy low and sell high.

Thu, 12/05/2013 - 11:16 | Link to Comment Jumbotron
Jumbotron's picture

Clearly this guy is a TERRORIST !!!!

How DARE he challenge the mantra of Corp/Fed that bigger is ALWAYS better.....and optimal ?

Not only that.......he's a PINKO COMMIE BASTARD TERRORIST. 

Whaddaya MEAN that it's THEIR money.........it's YOUR money Tepper.  Don't you know ANYTHING ????

 

Thu, 12/05/2013 - 10:48 | Link to Comment Took Red Pill
Took Red Pill's picture

"hedge funds returning cash due to lack of investment opportunities or simply shutting down"

Pretty much sums up the current state of the markets.

Thu, 12/05/2013 - 12:31 | Link to Comment Agent P
Agent P's picture

We are balls to the wall on returning excess cash! 

Thu, 12/05/2013 - 11:03 | Link to Comment Dr. Engali
Dr. Engali's picture

He should go balls to the wall on bitcoins. They are on sale today. Just don't go to China with them.

Thu, 12/05/2013 - 11:08 | Link to Comment RSloane
RSloane's picture

Of all of the articles published on ZH this morning, this one is the least predictable and most interesting to me. Returning money to investors is almost counter-intuitive in the current economic environment. The lack of viable investment opportunites should be a shot across the bow to other investment houses. I wonder what they make of this.

Thu, 12/05/2013 - 11:35 | Link to Comment NoDebt
NoDebt's picture

Yeah, that's pretty much what it is.  Very few ever return money for lack of opportunity.  Most just keep taking it in even if they've long since used up their top 10 best investment ideas.  Then their top 20, top 50, top 100.  Asset bloat sets in bigtime and performance suffers.  It's hard to push away from the AUM banquet table.

Thu, 12/05/2013 - 11:11 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

Phil LeBeau just sucked Mullally's cock on live TV....called Microsoft a Bastard Child!

Thu, 12/05/2013 - 11:17 | Link to Comment Derf Scratch
Derf Scratch's picture

Almost time for Turd Tepper to goose the market again with a CNBS guest appearance... can't have the Dow 250 pts. off the highs going into the "holidays"

Thu, 12/05/2013 - 12:43 | Link to Comment Ol' Painless
Ol' Painless's picture

I wonder if it has less to do with the lack of investment opportunity and more to due with tax issues. Are not investors in the fund responsible for paying taxes on the gains made through their interest in the LP or LLC entity that is the hedge fund? Say an investor has $1 million in the fund which has appreciated 30% or $300,000. Now that investor has to pay cap gains of 10% or $30,000. Would it not be easier for the hedge fund to return "excess cash" to investors to cover potential tax consequences rather then deal with the headache of multiple request to sell units of the LP/LLC to cover the cost of the tax consequence? I'm not an accountant so perhaps someone who is might share their thoughts. It would seem like a logical reason to return "excess cash" to investors while at the same time it might generate some positive press making it sound as if the hedge fund is doing so well that it has too much cash to know what to do with.

Thu, 12/05/2013 - 12:54 | Link to Comment novictim
novictim's picture

So what do we call this returned money?  Can we call it a "knock at the door"?  

Is this the wake up call to all of us that capitalism has, once again, run its natural course?

Think about it: This "excess capital", to the tune of BILLIONS of DOLLARS, is considered by these wise investors to have NO role to play in the business of investing.  

Step back and consider the implications here, Zero Hedge!  

(Yes, yes, never mind the massive and ignored unemployment crisis and never mind the unreal levels of wealth disparity and financial inequity (iniquity?) that you all here on ZH blithely take as "OK".  I won't drag you in that direction on this one, promise!)

I'm asking you to consider what this implies about an economic system who's most basic responsibility it is to allocate resources in a productive and wealth-sustaining manner.  

The implications here are chilling to our near future prospects.  It seems that this monopoly game is once again at or near an end.

 

 

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