NEW YORK (Reuters) – Prominent U.S. investor Jeffrey Vinik is promising potential clients a cut in fees and said that it had been tougher to raise money than he initially thought, as he prepares to relaunch Vinik Asset Management after six years on the sidelines.
Vinik, who once ran Fidelity’s Magellan mutual fund and then oversaw $10 billion at his own hedge fund, had hoped to raise as much as $3 billion in the hedge fund relaunch.
But with only a few days to go before his planned March 1 launch, Vinik is both tempering expectations and trying to drum up support quickly so that he has as much cash as possible to put to work.
“We will offer investors a 50-basis point discount on management fees in our 1/30 and 2/20 tranches,” the fund manager wrote in a letter seen by Reuters.
Raising $3 billion by March 1 was no longer feasible, he wrote, explaining that his “expectation for the timing of inflows has been too optimistic.”
A spokesman for Vinik declined to comment.
Vinik, 59, said last month that he was returning to investing for clients at a time many rivals are throwing in the towel. He said he missed competing with the world’s biggest institutional investors and criticized some of his fellow hedge fund managers for poor performance.
But the sluggish returns have weakened investor appetite for hedge funds. Those who are still tempted to invest are taking more time to carefully research their choices, industry analysts said.
That is a clear change from the heady days of 1996 when Vinik’s reputation created such a buzz that he raised $800 million on the first day of the original Vinik Asset Management and closed to new investors immediately.
Vinik said in the letter he understood that he had asked institutional investors to hurry their standard due diligence process and wanted to thank them by offering a “founder’s share class” for the first $1 billion of outside capital raised. These types of arrangements often offer lower fees in return for early commitments.
Even as he offers his fund at a discount, Vinik said that he was still sure it would grow and be successful.
“We have full confidence in our ability to become a multi-billion dollar long-short equity fund … and provide our investors with great results,” he wrote.
Reporting by Svea Herbst-Bayliss, additional reporting by Lawrence Delevingne, Editing by Rosalba O’Brien