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January 1, 2003

The Hedge Bug Bites

By Kathryn M. Welling

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  • The Hedge Bug Bites

Tim Curro, who runs hedge fund Value Holdings LP, and a couple of private partnerships from offices on New York City's Lower Broadway, is an unassuming sort of guy. Brilliant, hard-working. And it all might have been wasted on a legal career if he hadn't run into an inspiring personal finance prof while working his way through UC Davis.

Instead, he detoured through Berkeley to pick up an MBA only to find that no Wall Street firm showed the slightest interest in the valuation models for E&P companies he'd worked on all through grad school. Nothing daunted, Tim took the only job he was offered, as a corporate financial analyst, and started researching and writing an investment newsletter, on robotics, in his spare time. Which he circulated strictly to 200 investment types he figured might hire him. In 13 months, it worked. He was hired as a junior analyst in San Francisco and by the early '90s he had moved to NYC to cover E&Ps for Lehman. Several nice calls later, Tim found himself putting in a stint at Omega Advisors. And bitten by the hedge bug. This hasn't been Tim's - or his partners' - favorite year. Still, they're well ahead of the game. And Tim, a stickler for value, is having no difficulty finding stocks he wants to buy. Now. -KMW

Tim, this has been by far your toughest year since starting Value Holdings. Running a hedge fund is supposed to be the yellow brick road to riches. Yet here you are, almost 8 years after leaving Omega Advisors to do your own thing, still a sole practitioner and still running less than $100 million. And that's despite a long-term record a lot of guys would sell their souls for -

Well, we were at $100 million on June 1, then had a terrible month. So we then had about $10 million of withdrawals and are down not quite 8 percent on the year.

It's a hard business.

I know of a couple hedge funds that are really hurting right now. Where guys went out and took a more aggressive approach, raised $50-$60-80 million, got office space and hired 6-8 people. Now they're down on the year, have high water marks and no incentive allocations in the foreseeable future. Even a 2 percent management fee, in that situation is not enough to go around. That's just not fun. I've gone out of my way to avoid that. So it's taken me lot longer to get to critical mass than I thought.

But it's still the strategy that I am sticking with. But it does look like you'll likely end this year in the red -

That's right.

You don't take comfort in the fact that you're beating the market by a mile?