Jamie Dinan’s York Capital Management to Largely Wind Down Hedge Fund Operations
York Capital to focus on businesses with longer term capital, according to letter
Billionaire hedge-fund manager Jamie Dinan told employees and investors in York Capital Management Monday that the firm was largely getting out of its struggling hedge-fund business to focus on better-performing units.
Mr. Dinan said he planned to shut down York’s European hedge funds and to turn its flagship U.S. hedge fund into one running mainly internal money. The strategies together manage less than $3 billion after years of weak performance and investor defections.
York still expects to run roughly $9 billion in private equity, private debt and other vehicles that lock up client capital for longer periods.
York’s assets under management have come down significantly from a high of $26 billion in 2015.
Mr. Dinan’s retreat from one of the longest-lived hedge-fund businesses in the industry illustrates the challenges managers who don’t focus on technology investing have faced the last several years.
The firm also has gone through a rocky attempted succession, with Mr. Dinan getting more involved in running the firm early this year after ceding some responsibility. York said in an investor letter Monday that co-investment chief Christophe Aurand was leaving at the end of the year, Mr. Aurand having told the firm he wanted to “take a step back.”
Mr. Dinan described the changes in the client letter as ones that “we believe will position the firm to continue to capture the most attractive investment opportunities globally across the highly dynamic and disrupted financial markets in which we operate.”
Mr. Dinan, who started York in 1991 with $3.6 million, turned the firm into a quiet but steady profit machine investing in troubled and merging companies. He was one of the most prominent investors in the hedge-fund industry by 2010 when he inked a deal with Credit Suisse Group AG , selling a 30% stake in York. The deal was seen as a sign of how institutionalized and profitable hedge funds had become.
Thanks to York, Mr. Dinan went on to buy a piece of the Milwaukee Bucks professional basketball team for $100 million, a private Gulfstream jet, and homes in New York and Miami Beach. He helped get wrestling reinstated in the Olympics; his sons wrestled in school.
But York, along with a raft of other hedge funds, has been challenged in recent years. Mr. Dinan led an intensive effort in 2016 to retain clients and the firm awarded fee cuts to some clients.
York earlier this year conducted a round of layoffs and has been planning for additional layoffs toward the end of the year, said people familiar with the firm. Several veteran executives have left and not been replaced. York’s head count has fallen from about 215 in January to about 180 currently, said a person close to the firm. The person said only a “handful” of layoffs were expected in the remainder of this year.
York’s $1.4 billion flagship fund was down 6.6% for the year through September and its largest European hedge fund was down more than 9% for the period. The letter said the flagship fund had averaged an 11.1% return a year since its start.
Mr. Dinan will continue as chairman and chief executive of York, the letter said, with William Vrattos continuing as sole investment chief.
The letter also said York’s Asian hedge fund, led by Masa Yamaguchi, which has performed well in recent years, and “related vehicles” would be spinning out into an independent firm. Mr. Dinan wrote York would keep a sizable investment in the firm.
York earlier this year raised $1.3 billion in a distressed asset fund that locks up client money for a longer period. Mr. Dinan wrote that business was seeing “a broad range of opportunities created by the current challenging economic and banking landscapes.”