Lion Star Fund Massively Outperforms Established Hedge Funds

Depending on who you ask, the outlook for hedge funds is either promising or gloomy. What is certainly true is that the number of hedge fund startups has been slowly increasing since the Great Recession. In the first quarter of 2014 alone, the financial industry saw the creation of 289 brand new hedge funds. This comes at a time when government regulation has chased out most big hedge funds. George Soros, for example, has shifted gears by operating as an “untouchable” family office.

Other funds are looking to take the opposite approach. For instance, the Lion Star Family Fund, which has operated as a private family office for eight years, is looking to diversify by becoming a full, British Virgin Islands-registered hedge fund. Although federal regulations and compliance laws have made operation as a hedge fund an unattractive option, the Lion Star Fund feels it has the pedigree and the know-how to invest with great success.

A History of Solid Gains

Over the last 8 years, the Lion Star Family Fund has consistently seen growth as a family office. The initial investment in the fund’s account was a mere $500,000. After the first year of operation, the fund saw a 42.6% return on initial investment. The total amount in their coffers by 2007 was $1,026,007. Over the following years, the Lion Star Family Fund saw increasing returns on the initial investment, including a 47.3% increase in 2008 and a 48.6% increase in 2010. After only five years of operation, the fund was working with over $3 million in returns on their initial investment.

The gains only continued into the latter half of their tenure as a family office. Returns of 47.1% in 2012 and 48.9% in 2013 produced a total of over $10 million in assets for the Lion Star Family Fund. Over the course of 8 years, the firm produced average realized returns of 45.4%, an astounding amount considering the often shaky economic environment during that run.

Of course, these gains aren’t produced simply through luck. The Lion Star Family Fund has consistently made calculated, safe investment plays on metals, currencies and world stock indexes.

Comparison to Other Funds

The $10 million in assets that the Lion Star Family Fund maintains may seem like small potatoes compared to some publicly-traded funds. For instance, The Blackstone Group (BX) has produced equally consistent returns since 1995. The major difference between the Lion Star Family Fund and the Blackstone Group is the fact that the latter started with $1 billion in investment capital. By 2014, they were operating with $272 billion in assets.

Interestingly, the average yield per year was around 28% for the Blackstone Group. Although the Lion Star Family Fund is certainly working with a smaller amount of capital and sway, they were able to outperform the Blackstone Group in average returns percentage. In fact, during the volatile period during and after the Great Recession, average returns for the Lion Star Family Fund thrived over 40% while the Blackstone Group struggled, averaging only 9.5% per year in returns between 2007 and 2011.

KKR & Co. KKR is another example of a hedge fund with billions of dollars’ worth of assets under management, but middling yearly gains. From 2013 to 2014, their assets increased from $94.3 billion to $102.3 billion—an increase of only 8.4%.

Clearly, the Lion Star Family Fund and the offshoot Lion Star Fund are a long way off from working with that kind of money. But, their consistent returns as a family office suggest smart trade’s solid business practices. And the ability to navigate in extremely volatile and unpredictable market conditions. They are also a much more accessible option for investors who don’t have truly massive amounts of wealth to utilize. The Lion Star Fund is effectively designed for the “not-as wealthy,” and, with its history of success and stability, the fund is primed to make a splash with public investors.