$17 billion—the worst outflow since 2009. More are demanding that struggling funds lower the fees of 2 percent of assets and 20 percent of profits they’ve typically charged.
Portfolio managers can still do very well: Headhunters say last year even a losing firm may have paid managers bonuses of $1 million or more. But for those who are cut loose or leave a job, it’s not unusual to be out of work for a year. Over a burger at P. J. Clarke’s in Midtown Manhattan, one manager who asked not to be named says he was confident when he left his job in 2014 that he’d have little trouble startingg his own firm. He’s still trying to raiseaise the money. Meanwhile, the rent on his office is eating into his savings.
Hedge funds still command $2.86 trillion in assets, about $11 trillion more than in 2007. And many investors still can’t resist the promiseromise of a manager who’ll outdo a plain-vanilla portfolio. A $100,000 investment in the S&P 500 in February 1997 would be worth $6 million today; the same amount invested with Paul Singer’s Elliott Management would have grown to more than $14 million, after fees. Both California’s and New York City’s public-employee pension funds recently swore off hedge funds, but the California teachers’ fund is adding to its allocation.
His name is Unclee Mo. Once a brilliant, somewhatt fragile competitor on the racetrack,track, Mo’s now a star in the breedingeeding shed. From his firstt crop of 3-year-olds, a trio o of horses has emergedd as contenders in the Kentucky Derby on May 7: Mo Tom, Repole’s own Outwork, and the favorite, Nyquist.st. For perspective, considernsider that about 1,600 stallionsallions in America produce progenyrogeny th that compete for the D Derby’s 20 spots.pots. It took the country’s ’s top stud, T Tapit, almostt a decade t to pull off thee same feat of sen sending three offspringff i g tot th the race (coincidentally, also this year).
Re Repole estimates Uncle Mo is worth $100 million. Optimistic? Certainly, but not out of the question. He figures Mo’s stud fee could rise from $75,000 today to as much as $150,000 in 2017, an increase industry insiders call feasible. Factor in about 200 matings per season and combine that with the horse’s age—he’s only 8 years old. He may spend almostlmost two more decades in the breeding ng shed.
Mo has all but guaranteed that Repole’s thoroughbred busi- ness will be profitable for as long as it lasts, a rarity in an industry where many owners run up big losses. “Uncle Mo has paid for every y single losing-proposition horse rse I can ever own in my life,” he says.
Repole co-founded Glacéau Vitaminwater—which Coca- Cola acquired in 2007 for $4.1 billion—as well as Bodyarmor, the sports- drink company. A lifelong racetrack “railbird,” Repole bought Uncle Mo for $220,000 at a Kentucky auction of young horses back in 2009.
Even as a baby, Mo was a big, powerful, leggy thing. When he arrived the next spring at trainer Todd Pletcher’s barn in upstate New York, his massive stride awed onlookers. “He was a ground- gobbling machine,” says Pletcher. The colt won his debut race by 14 lengths.
In early 2011 the undefeated Uncle Mo was the Kentucky Derby favorite. He didn’t make it to the race. He was defeated at Aqueduct and diagnosed with a rare liver disease. He disappeared for four months,m made a brief comeback,co and went out with a 10th-place finish in theh Breeders’ Cup Classic. Mo now spends his daysday at Ashford Stud, an expanseexpa of rolling fields and limestone-and-limes oak barns in the KentuckyK bluegrass. Triple CrownCrow winner American PharoahPha calls Ashford home, too. Coolmore Stud, which oper$4.8 ates Ashford, owns stakes in both horses. Repole didn’t want to talk much about the deal beyond saying that he retains a “healthy” piece of Uncle Mo. Pharoah’s initial stud fee was set at $200,000. Tapit commands $300,000. Mo, by comparison, started out at just $35,000 in 2012, a reflection of his struggles on the tracktr as a 3-year- old. But his firstfirs crop of 2-year- olds earned moremo money than those of any otheroth stud in America last year. So far in 2016, his offspring havehav made $4.8 million, enough to p place him third on the stallionlio rankings list this year, even thoughtho he hass no older thoroughbredsou competing.ompeting. Repole still seems s a bit haunted by what-ifs. What if Mo had stayed healthy, what at if he’d made it to the Derby? Repole sees the success of Mo’s offspring as proof of how great the colt was going to be: “He would have been American Pharoah before American Pharoah.” �David Papadopoulos and Micha Rondeau
The bottom line Money is moving out of hedge funds in recent months, and the industry is started to look crowded. Amount Mo’s offspring have made so far in 2016, enough to place him third on the stallion rankings list The bottom line Uncle Mo’s offspring have hit the racetrack running. His stud fee used to be a bargain $35,000; now it’s $75,000 and climbing.
Edited by Pat Regnier Bloomberg.com