Larry Robbins Glenview Capital: Style, Returns and Alpha

Larry Robbins’ Glenview, once a$9 billion hedge fund, lost around half of its assets and underperformed the market in 2008. Asset losses and a poor performance made them lay off 12 employees right before Christmas that year. Glenview lost around 50% in 2008, but the bad days may be behind them now. The fund returned 82.7% in 2009 and 9.06% through the first 9 months of 2010. Still, Larry Robbins hasn’t surpassed his high water mark, so he couldn’t collect incentive fees for the past two years.

Prior to founding Glenview Capital in February 2001, Larry Robbins was a trader at Leon Cooperman’s Omega Advisors. Larry Robbins’ Glenview Capital returned 260% from February 2001 to September 2010. Its investors achieved an annualized 14.2% return for the past 10 years or so. Larry Robbins invests both in stocks and bonds, and sells some companies short. For the past couple of years his net equity exposure was around 40-60%, so his portfolio seems to be partially hedged (his 50% loss in 2008 contrasts this). At the end of September, Glenview’s top 10 long positions accounted for 51% of their capital. Robbins’ top 10 short positions represented only 7% of Glenview’s capital. There’s a huge weight difference between the size of longs and shorts. This implies that Larry Robbins has more confidence in his longs than his shorts.

Insider Monkey, your source for free insider trading data, obtained most of Larry Robbins’ returns from Dealbreaker. We have October-November 2008 returns, as well as January through September returns from 2009 and 2010. Of course we prefer at least 3 years of data (from 2008-2010), but having October and November 2008 returns alleviates the problem a little bit. Running a regression using only 2009-2010 data would yield ridiculously good results.

Our results indicate that Larry Robbins’ Glenview Capital didn’t have any alpha for the past two years. This is despite the fact that their net returns were the same as their gross returns (they are below their high water mark). Glenview’s market beta is 0.80 whereas their size beta is 0.53. They are definitely not value investors, with a negative 0.68 “value effect” beta. They also do not follow momentum stocks. As usual, we used Carhart’s four factor model to calculate alpha and betas. Their alpha is 7 basis points per month but we have only 20 data points to calculate it and we didn’t have all of their 2008 monthly returns. If we had these data then L-Train’s alpha would most probably have been negative.

Larry Robbins didn’t generate any alpha but there are other hedge fund managers like Jim Simons, Daniel Loeb and Whitney Tilson who generated alpha during the past 3 years. We also came across some mutual funds with some alpha, like Guggenheim Insider Sentiment ETF (NFO) and Tilson Dividend Fund (TILDX).