That Tilson's fund was down 0.9% in February is no surprise. After all the company's Qualified fund has underperformed the S&P since inception in 2004 (more on that in a second). After posting a gain in January, T2 is back to its losing ways (as a reminder the fund was down 20% in 2011, which means it has to post a well bigger than 20% return in 2012 to get above the high water mark). Tilson's performance is summarized as follows: "On the long side, winners included Citigroup (8.5%) and SanDisk (7.8%), offset by Netflix (-7.9%), Grupo Prisa (B shares) (-7.4%), and J.C. Penney (-4.7%). On the short side, we profited from First Solar (-23.6%), which just reported dismal earnings and guidance, Interoil (-10.4%), and Boyd Gaming (-8.7%). These gains were offset by Salesforce.com (22.6%), which is growing rapidly but trades at 8.7x revenues and has a $19.6 billion market cap despite being unprofitable. In addition, Green Mountain Coffee Roasters, which we think is likely to be the next Krispy Kreme (for those of you with long memories), rose 21.8%" And also "Since Berkshire reported earnings, the stock is actually down a bit so we took advantage and, though it was already our largest position, we added to it." All that is fine and well, but we have two questions. What is Tilson's, a self-professed "value investor" Sharpe Ratio? Judging by the monstrous volatility swings in its marginal positions, the fund is as much a value investor (read slow, stable rise), as a momo investor is the Queen of England. How long until the CME opens a triple levered (forward and inverse) ETF to take advantage of the already ridiculous monthly vol in the Tilson portfolio, whose Sharpe, just by eyeballing it, must be negative give or take.
And our second question is why did the fund switch from presenting the cumulative return comparison from its benchmark Qualified Fund, to its Accredited? Would it have something to do with the fact that Tilson Qualified investors (i.e., most of them), have underperformed the S&P since inception? Also, why did Tilson go ahead and retroactively change its letters to reflect this rebenchmarking? Are investors (if any) aware of this? Because luckily, we managed to save an old copy of Tilson's September performance letter [7]. It differs quite dramatically from the one currently residing in the T2 database [8].
See if you can spot the difference:
Old [7]...
[9]
And new - much better right [8]?
[10]
At the end of the day, it's all about optics, as with every other "manager"
Full letter: save it before it too is mysteriously retroactively adjusted.