Chris Hansen may be close to buying the Sacramento Kings and moving the National Basketball Association team to Seattle, but his hedge fund put up an air ball in the fourth quarter.
In his year-end letter to investors, Hansen said his fund, Valiant Capital Partners, had a net loss of 7.44 percent in the final three months of 2012. The Standard & Poor’s 500 stock index, by comparison, fell just 1 percent in that period.
The San Francisco investment manager called it Valiant’s worst quarterly performance since he started the company in 2008, according to the letter, which was obtained by Institutional Investor’s hedge-fund blog Alpha.
Though he trailed the stock-market averages for the quarter and the year, Hansen tried to reassure investors that he hasn’t taken his eye off the ball.
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“Investing, not basketball, is and has always been” his passion, Hansen wrote, according to Alpha. “Investing is what I think about when I wake up, on the drive to work, and just before I drift off to sleep.”
Hansen’s main fund managed a full-year net return of 10.32 percent, according to the letter.
Including “side pocket” investments such as Facebook stock and real estate that are managed separately from the main fund, Valiant last year had a total net return of 5.64 percent.
That’s not much, given that the plain-vanilla S&P 500 index gained 13.4 percent last year.
Hansen could not immediately be reached for comment on the letter.
In January, a group led by Hansen, Microsoft CEO Steve Ballmer and two members of the Nordstrom department-store family agreed to pay just over $340 million for 65 percent of the Kings.
The group plans to move the team to Seattle, perhaps as soon as this fall, and build a $490 million arena in the Sodo neighborhood.
However, a rival group also has bid to buy the Kings, with the goal of keeping them in Sacramento.
NBA owners will decide next month whether to approve the Hansen deal.
In his letter, Hansen wrote that “unlike at Valiant, where I am intimately involved in almost every element of our operations on a daily and weekly basis, my role in Seattle will be to provide a stable, patient, civic and community minded ownership group — and not to become intimately involved in player/personnel decisions.”
The letter, as cited by Alpha, said Valiant managed $2.8 billion of assets as of year-end.
It also provided a few glimpses into Valiant’s investment strategies, which Hansen, like most hedge-fund managers, has kept close to his vest.
“Given our patient style on the long side and focus on shorting the worst businesses we can find (particularly frauds), volatility is an undeniable reality of our business,” he wrote. “While this volatility can result in periods of outperformance like it did in Q3, it will also inevitably lead to periods of significant underperformance like it did in Q4.”
It’s not known how Valiant’s fourth-quarter results affect Hansen’s own income or net worth, which he is not obligated to disclose.
Hedge-fund managers receive a management fee, typically 2 percent of assets under management, regardless of how the fund performs.
They also receive a share of any profits, usually 20 percent.
Drew DeSilver: 206-464-3145 or firstname.lastname@example.org