A high-profile hedge fund sent a letter explaining all the reasons it lost money last year, and why it is going to do better this time

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February 13, 2017 11:47 PM

Sol Kumin, the founder of Folger Hill Asset Management, lays out all the reasons his hedge fund firm's flagship fund tumbled 17.5% last year.

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A high-profile hedge fund founded by a Steve Cohen acolyte sent a letter to investors explaining all the reasons for its underperformance.

In a January investor letter, Folger Hill's Sol Kumin set out why his firm's flagship fund dropped 17.5% last year. Among the cited reasons: a difficult environment for stock pickers, hedge fund "crowding" and the US election.

"I am truly sorry that we have not delivered better results thus far to our investors who put their faith in me," Kumin wrote in the letter, a copy of which was reviewed by Business Insider. "I

The firm's flagship fund, Folger Hill Partners LP, fell 17.5% last year net of fees, compared to a 12% rise in the S&P 500, according to the letter. In the fourth quarter alone, the fund fell 10% compared to a 3.8% gain for the S&P 500.

"[T]he Fund’s net short positioning (1.7%) served as a material headwind, as U.S. equity markets generally moved higher throughout the year," Kumin wrote in the investor letter. "In addition, our short book performance was particularly poor following the U.S. election results in November."

The firm also chose the wrong sectors to invest in, Kumin wrote, focusing on "out of favor" sectors like healthcare, consumer staples, and technology, media, and telecoms rather than sectors "with greater overall momentum" such as energy, financials and industrials.

Still, the firm expects a turnaround this year. "

The firm lost about a third of its assets last year, Reuters reported. The firm managed about $1 billion as of mid-2016, according to the Hedge Fund Intelligence Billion Dollar Club, and assets fell to about $600 million just three months later, according to Reuters. Its current assets under management were not clear.

A spokesman for Folger Hill declined to comment.

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