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Just got finished with Harris Kupperman’s Q2 investor letter, which reads less like a traditional fund update and more like a raw, introspective journal entry.
Despite a net gain of 3.59% for the quarter and 6.11% year-to-date, Kupperman opens with frustration. “I remain highly frustrated with the Fund’s performance over the past few quarters, and I know that I can do better,” he writes.
While core positions appreciated moderately and the Event-Driven book cushioned some downside, he is quick to own the underperformance: “To blame a market regime is wrong… I’ve failed in my quest to identify undervalued companies with accelerating momentum, while becoming attached to certain ideas.”
He doesn’t deflect responsibility, and instead reflects on how success may have bred complacency. “I simply got a bit over-confident in things,” he admits. This moment of honesty sets the tone for what becomes a philosophical and strategic reset. In May, he enacted what he calls a “hard reboot,” selling off much of the portfolio and stepping away from the markets entirely.
“This is certainly not my first slump, nor will it be my last one,” he writes. “I need to turn off my brain for a bit, and completely step away from the markets. I need to come back fresh, with a bit of contrition about what hasn’t been working.”
This concept of the hard reboot isn’t new for Kupperman; he notes doing something similar in Q4 2019, which allowed him to return with clarity and capitalize on the chaos of early COVID.
“Many of my prior hard reboots have also led to spectacular returns in the quarters after returning,” he says. This time, having returned in July, he plans to move slowly, with a focus on waiting for “undiscovered, and newly inflecting trends,” rather than rushing back into action. “Cash is our edge here,” he asserts, embracing the fund’s ability to stay nimble. He reiterates that Praetorian is rarely correlated with the overall market, and he’s unbothered by missing upside while sitting in cash: “I do not care if the market goes up or down while we retain a large cash position.”
What emerges next is a strikingly personal inventory of what has and hasn’t worked in his process.
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Author: Quoth the Raven
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