Jeff Ubben Is Returning $1.25 Billion To Investors Because The Market Is Overvalued

Wednesday, April 12, 2017
By Paul Martin

by Tyler Durden
Apr 12, 2017

Two months ago we reported ValueAct’s Jeffrey Ubben, one of the most-respected activist hedge fund managers, had been taking money out of the capital markets as valuations have become overextended, leaving it with $3 billion in cash. As justification, Ubben said that “I really feel that the large-cap activist plays are very treacherous with high PEs (price-to-earnings) and not a lot of growth,” and added that he was not focusing on any particular sector but instead looking for bets on idiosyncratic, mid-sized companies such as spin-offs and “weird” corporate structures.

Now, thanks to his latest, April 3 letter to investor, we also learn that he is returning a substantial amount of the excess cash to investors because he believes that the market is overvalued, and going forward he will fund purchases primarily by taking profits on existing holdings.

In his letter, as seen by CNBC, Ubben writes that “the broader market context is explicit to us. The S&P 500’s median P/E ratio is 18 times. For most high quality companies we follow, it is much higher. These valuations can only be justified by assuming cyclically high corporate margins will persist, a certainty of lower corporate tax rates and a risk-free rate that stays near all-time lows. We are skeptical of all of the above.”

As a result, the hedge fund will return $1.25 billion in capital to its limited partners starting on May 1. As in February, Ubben cited the higher-than-normal cash balances in the fund ranging from 10 percent to 29 percent since the end of 2015 versus the 5 percent average during the last decade.

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter