Institutional investment manager company AJO Partners is closing down and returning funds to its investors, a letter from AJO co-founder and Co-CEO Ted Aronson to the company’s clients revealed. The fund will return $10 billion to investors in an act reminiscent of Warren Buffet’s closure of his Buffet Partners in 1969.
Market Driven by Many Forces, AJO Lost Its Edge
Ted Aronson explained in the letter to investors that the current market conditions are causing the fund to suffer, having lost its competitive edge due to many forces influencing the market, but the main reason for the drastic decision to quit is the period of draught the company founded in 1984 is currently experiencing, with no end to it in sight.
“Our relative performance has suffered because our investment edge, our ‘secret sauce,’ is at odds with many forces driving the market.”Ted Aronson, Co-Founder and Co-CEO, AJO Partners
The prolonged period of no value and the severity of market headwinds are posing challenges to the value-oriented US and international equities investment manager company and instill concerns among its clients, consultants and employees, Ted Aronson continued in the letter.
Ted Aronson in the Footsteps of Warren Buffet
Showing courage to admit that the fund lost its edge on the market and call it quits, Aronson’s letter to AJO investors is reminiscent of a similar act which took place in 1969, when now billionaire investor Warren Buffet felt his Buffet Partners hit the wall and decided to close it and return funds to the investors.
He also sent a letter to his company’s investors laying down his worries related to the sharp decline in market bargains available, the market volatility caused by the drive for short-term profits, the challenge he sees in managing large funds with fewer investment ideas and the lack of interest from his side to seek short-term gains.
“I can’t emphasize too strongly that the quality and quantity of ideas is presently at an all-time low. I just don’t see anything available that gives any reasonable hope of delivering a good year and I have no desire to grope around, hoping to ‘get lucky’ with other people’s money.”Warren Buffet, CEO, Berkshire Hathaway
Warren Buffet found the courage to tell his investors he felt out of step with present market conditions due to the high level of speculative actions which undermined his mid- to long-term approach, and as the backdrop showed to signs of abating, he informed his investors of his closure plan.
“I am not attuned to this market environment and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.”Warren Buffet, CEO, Berkshire Hathaway
For the 13 years of operations, Buffet Partners delivered a compounded annual return of 29.5%, and, helped by fresh inflows of capital, managed to grow the fund’s asset base from $105,000 to $105 million.