Last week we learned that Lee Ainslie's Maverick Capital had struck a compromise with investors: The fund might not make any money for them, but in the event that it did, performance fees would be waived. It was a lose-lose: Either investors would say goodbye to income or Maverick would.
Now Maverick is has an even more tantalizing offer. Thanks to a decade's worth of investing in quanty guys with their codes and databases and all that stuff, Maverick is on the brink of a hedge-fund breakthrough that will shake the foundations of the investing world. In a recent letter to investors, Ainslie intimated that his fund – and possible none other, ever – has “cracked the code”:
"Through combining inputs from various data sets over the last few months, we believe we have begun to improve dramatically our ability to forecast revenues, cash flow and earnings of hundreds of companies across several sectors, and the number of industries and businesses for which we are developing such capabilities are both growing rapidly. Both in terms of idea generation and business monitoring, such insights should prove invaluable to our core, fundamental effort, and I believe that few, if any bottom-up investors have cracked the code."
Before we get into speculating what code it is we're dealing with here and what it means to crack it, we should give Ainslie some leeway. Apparently his quant fund, which has employed the code-cracking technology, is up nearly 17 percent through August, compared to 12.5 percent for the S&P. Clearly something is working.
But if a $10.5 billion equities fund based out of Dallas has somehow managed to plumb mathematical investing secrets that have remained obscure to the likes of RenTech and D.E. Shaw and Bridgewater and Two Sigma and everyone else for decades – an impressive feat! – perhaps there's a slightly less 2-am-household-cleaning-product-informercial way of announcing it to the world.