Friday, May 15, 2020

Open letter to Institutional Investor Magazine

Last night Australian time Institutional Investor published a piece on Bronte Capital's position in Herbalife.

To quote the opening sentence:

Australian hedge fund manager John Hempton, the co-founder of Bronte Capital, has turned out to be a true believer in Herbalife, the controversial multilevel marketing company that has been under investigation by one federal agency or another for several years. Over the past year, Hempton doubled down on Herbalife...

I observed on twitter that contrary to standard journalism ethics the author (Michelle Celarier) did not seek our comment before publishing.

She told me to check my email. So I did. Ms Celarier did in fact send something.

Here it is:

Michelle Celarier
01:15 (12 hours ago)

Hi John 
I am writing a news story for Institutional Investor about your investment in Herbalife, as you disclosed updated filings for the quarter.   
I note that you've been adding to your position over the past year, according to the SEC. 
I also quote from your recent letter about Herbalife-- and note your performance this calendar year. 
Just wanted to let you know about this. I'm on deadline, so if you have further comment please respond asap. 
Thank you 

Michelle Celarier
917 971 0279 
Follow me on twitter @mcelarier
You will notice that this came at 1.15AM Australian time. It came when I was (and could reasonably be expected to be asleep). The story was published before I woke up at approximately 6AM.

This is a clear breach of journalist ethics. But it is also sloppy and demonstrates what happens when you do not check your facts.

There are two reasons our Herbalife position has increased.

a). Our fund was closed and it re-opened. We got considerable flows. We adjusted the Herbalife position to match the flows.

b). We sold a large position in the 50s (when Bill Ackman covered) and we repurchased it (and then some) at lower prices.

The second one is instructive. If you sell a $1000 worth of Herbalife stock at $53 and buy it back at $27 you will wind up with more Herbalife stock. (This trade matches some of what actually happened in our book.)

For these reasons our Herbalife stock position (measured in number of shares) has increased considerably.

But the position measured in the percentage of the fund at cost has actually shrunk. We did not "double-down" as the article suggests - we actually took some off the table.

The article is false and should be withdrawn.

The statement that we doubled-down is contrary to both our risk management policy and what actually happened.

That said: for the record we still think the stock is a good value at this price. We have a full-sized position now (or we would buy more). But that is not a newsworthy story. The only story Michelle Celarier has is that a fund manager is bullish about a stock they own.

John Hempton


  1. The original article requires a subscription so no one is going to read it anyways. But congrats on some good trading.

  2. If I remember correctly, the reporter was a mouthpiece/shill for Bill Ackman. I believe that she was fired from the NY Post which, in itself, is quite an achievement.
    Your comments about Herbalife when Ackman was attacking the company were balanced and thoughtful. Good work and good investing. Congrats!

  3. "I'm on deadline, so if you have further comment please respond asap."

    Interesting premise, as if not getting the work done sooner liberates the author from the lack of journalistic responsibility demonstrated.

    Sorry to see this, John, but appreciate your response.

  4. This feels like much ado about nothing. What about this article made you feel so wronged? If you are worried about how your investors might react, then surely that's something you can address on a bilateral basis?

  5. Accusing an investor of pursuing a Martingale Strategy is a heavy allegation.

  6. Hi John, this isn't related to the post's topic, but do you have any recommendations for getting acquainted with what a career in a hedge fund entails, and how to prepare oneself for it as someone fresh out of college?

  7. I certainly hope you provided Ms Celarier several hours' notice via email overnight before you posted this!

  8. You come across as very petty in this blog post.

  9. I believe that she was fired from the NY Post which, in itself, is quite an achievement.