Stay informed with free updates
Simply sign up to the Hedge funds myFT Digest — delivered directly to your inbox.
A London hedge fund that lost about three-quarters of its assets during a period of poor performance earlier this decade is raising money for a new fund as it attempts a revival.
Pelham Capital, the firm founded by former Lansdowne Partners fund manager Ross Turner, is meeting investors to raise money for a new fund to be managed by Turner’s second-in-command, Kayvan Larizadeh. Pelham is expected to launch the fund under the name Bayes Hill in May or June.
Turner is backing Larizadeh with $100mn of his own money, according to people familiar with the matter, and has made a three-year commitment that he will not pull his funds in that period.
Turner will have no formal involvement in running the new fund and will not meet current or new investors to raise money for it, according to two people familiar with the matter.
Pelham fell on hard times after the master fund managed by Turner declined 11.8 per cent in 2021 and 29 per cent in 2022. It lost money on investments including US online car retailer Carvana and travel platform Expedia.
As investors and employees left the firm, assets fell from $4.5bn in October 2020 to about $1bn three years later. The losses dragged Pelham’s annualised return between its inception in 2007 and mid-2023 down to 5 per cent, according to FT estimates at the time.
One of the people familiar with the matter acknowledged that Pelham had raised too many assets from investors, strayed into growth rather than quality stocks and was invested in far too many companies to maintain focus.
However, the few investors that stuck with the fund recouped the losses towards the end of last year, according to the person, as the fund soared 37.5 per cent for the year. This has allowed the firm to charge performance fees as it rose above the so-called high-water mark in returns towards the end of last year.
The recovery has been driven by bets on companies including hotel group Hilton, German gas and power supplier Siemens Energy and French aerospace and defence company Safran.
The new fund will try to revert to Pelham’s older investment style of backing about 15 high-quality stocks it believes are proven, established companies that will grow over the next several years, as well as smaller emerging companies on their way to becoming established.
The person familiar with the matter used Hilton as an example of a “proven compounder” that had rallied more than 150 per cent over the past five years.
It will also aim to manage between $2bn and $3bn, well below the $6bn at which the previous fund peaked, to stay nimble in its stock picks without incurring losses as it tries to exit large positions.
The team of analysts working on the master fund will move on to the new fund under Larizadeh.
He has invested an eight-figure sum in the fund, according to people familiar with the matter, while others including executives will also invest in it. Representatives have met with family offices, wealth managers and wealthy individuals in recent months to pitch the fund.
Unlike with the master fund where bonuses were discretionary, staff across the firm will share in the upside of revenues made from fees, regardless of whether they had invested.
