I was thinking about who could be doing well in this environment and the first name that came to mind was Albert Friedberg of Friedberg Mercantile. He's a veteran macro figure, who I knew had been bearish of late, along the lines of people who believe that the bull market of the past 11 years was due to Fed interventions. Friedberg started as a futures brokerage in 1971 from a suite at the King Edward Hotel. That timing allowed Al to make a killing in the commodities boom of the 70s. Over the years, the firm expanded into investment management. It's now been at Brookfield Place for many years. Al is currently 74, so he has seen many bear markets. His Global Macro fund was up 25% in 2007, 41% in 2008 and 26% in 2009. Plus, for reasons I elaborate on below, I suspect he's a billionaire.
When I read the Q4 letter of his Global Macro fund, I see he was pretty bearish about equity markets, writing: "Easy money financed a very large number of money-losing companies that would never have survived otherwise; there are more zombies walking around as a percentage of total public companies than there ever were. When it comes, the financial crisis will be as painful as the previous one, if not more so." In a big up year like 2019, the fund paid a price for such bearish views, finishing down 20.17% in 2019. But that was then, now, let's check the macro fund's incredible performance in 2020 and...it's down 58% YTD as of March 17th. Womp womp.
The reason for the losses this year might be because Al is positioned for rampant inflation. That may yet come to pass. A fund manager's performance is often a contrarian indicator. Maybe, the inflation trade will finally work. And before you think Al is some perma-bear one-trick pony, he also makes concentrated long bets with his own money. For example, he has been a long-standing backer of biotech Vaccinex. I had noticed in recent months that he was relentlessly buying shares of the company, including $5m worth in January alone. I had been wondering what he saw in it that the market didn't. Then when the coronavirus went big, I finally had my answer: probably nothing. The stock dropped 40%. Womp womp womp.
Now, to be fair, there's also the Friedberg Asset Allocation fund, which is doing better. It's down about 34%. Don't worry, in this environment, I will only be razzing people who, at a minimum, are billionaires, otherwise it would be unsporting. Almost every strategy will have its day in the sun, but macro is highly unreliable. I don't know on what basis you would put your trust in some macro clairvoyant.
The Friedberg funds now manage pretty small amounts, but at one point, Al was much bigger. In 2011, Forbes listed him as the 34th highest hedge fund earner, when his Global Macro fund gained 41%, through bets on Treasury inflation-protected securities and shorting emerging markets. At the time, he was managing more than $2 billion and earned $60 million in that year. But that was pretty much his peak performance. The fund has had negative returns in all but two years since then. If you had invested on Jan 2012, you would be down some 84% today. (The fund also has a losing record since inception, for good measure). Al said in 2011 that Europe is headed for a massive credit implosion, after which the world will fall into a global depression. Let's see if that finally becomes the case. In the meantime, don't transfer all your savings to this year's macro manager of the century, whoever that may be. See also John Paulson to figure if macro is the way to go.
I am always super fair-minded, so I should mention that Al’s investment management record, in the form of managed accounts probably long pre-dates his funds. His record from that earlier era must be more interesting, I can only assume. I have some vague memory of reading that he was involved in the same short British pound trade that made Soros a legend.
Friedberg used to have many more strategies, everything from equities to fixed income to currencies to external managers...There's nothing Friedberg can't do!....I am assuming only the two strongest funds, such as they are, survived.
If you had any notion from reading my last piece that I was reticent to go after the truly wealthy, perish the thought. Al presides over an empire spanning real estate, mining, forestry, etc. He is likely a billionaire. Besides hearsay, here are some hints: I recall he owned more than $100m worth of Arizona Star Resources alone when it was acquired by Barrick Gold in 2007. He also made a score with Seabridge Gold, which went from a startup to being valued at a billion dollars at one point. In 2018, he paid US $42m for 9% of the Orlando City Soccer Club. He owns what used to be a private bank in Barbados (which has a favorable tax treaty with Canada). Friedberg also has proprietary traders working for him.
I will keep trying to figure who is making money in this market. If you have any tips, please share. I genuinely thought Friedberg's long-standing bearishness would finally pay off. But I have to go where the numbers lead me. It may well be that Al's views are sincerely held and his website does say the Friedberg family is the lead investor in all their products. I trust that is of some consolation to the clients.
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