Lemelson Capital Management: Profile In Wall Street Journal Was 'Extraordinarily Error-Laden' And A 'Directory Of Fallacies'
Pictured above, Wall Street Journal reporter Rob Copeland with Rev. Emmanuel Lemelson.
On October 28, The Wall Street Journal published an article detailing Rev. Emmanuel Lemelson and Lemelson Capital Management titled, "Hedge-Fund Priest: Thou Shalt Make Money." The article discussed Apple Inc. (NASDAQ: AAPL), Geospace Technologies Corporation (NASDAQ: GEOS) and the firm's strategy. The investment manager has since published two responses to the story, calling it a "directory of fallacies." The second letter details what the firm says are 14 major factual errors and omissions.
Those letters are republished below, with permission. The WSJ's video interview with Rev. Lemelson is embedded below.
November 2, 2015
Mr. Daniel Fitzpatrick
The Wall Street Journal
1211 Avenue of the Americas
New York, NY 10036
Dear Mr. Fitzpatrick:
Rob Copeland's recent Wall Street Journal article ("Hedge Fund Priest: Though Shall Make Money," p. C1, Oct. 27, 2015) reads like a directory of fallacies. Inductive reasoning is used throughout to shift between affirming the consequent, begging the question, poisoning the well and equivocation to set up both false causes and false dilemmas in his story.
Mr. Copeland conveyed his understanding that participation in the endeavor was predicated on the article being focused of the life of the church, or alternatively the importance of wise investment policy within the context of a Christian ethic.
Mr. Copeland was given access based on his representations that, as his editor, you (a self-declared faithful Christian respectful of the church) would be overseeing every aspect of the story. I was surprised to learn subsequently that, like so many other misrepresentations, you had not been presented with any of the background correspondence related to the article.
What was published was a thinly-veiled ad hominem attack based apparently on Mr. Copeland's personal feelings, the insinuation and innuendo of which are wholly unsupported by evidence.
Major errors of omission, mischaracterizations and altered quotes, which I will be detailing under separate cover, are used throughout his article.
Mr. Copeland went to great lengths to suppress evidence –that is, to present only the pieces of evidence that supported his underlying thesis, while omitting the ones that contradicted it – in an effort to draw readers to his personal conclusions.
On two occasions, including during a phone conversation a few days before the article's publication, Mr. Copeland stated that he had the ability to assign negative readership opinion to subjects if he did not get what he wanted (in this case, material non-public information on The Amvona Fund, LP), going as far as to represent that he already had the information he was seeking when he did not.
Is this the standard of reporting and ethical principles to which The Wall Street Journal aspires?
+ Emmanuel Lemelson
November 2, 2015
Mr. Daniel Fitzpatrick
The Wall Street Journal
1211 Avenue of the Americas
New York, NY 10036
Dear Mr. Fitzpatrick:
Rob Copeland's recent Wall Street Journal article ("Hedge Fund Priest: Thou Shalt Make Money," p. C1, Oct. 27, 2015) contains dozens of factual errors, misstatements and major errors of omission amongst a litany of insinuation and innuendo. Among them are these fourteen significant errors (in order of appearance within the article):
1.) Mr. Copeland wrongly insinuates that I labeled Benjamin Graham's book, The Intelligent Investor, "the good book." I never used that phrase, which of course is commonly associated with the Bible.
2.) I have never boasted of "crashing stocks" in between sacraments, as he reports, and in fact would never allow my service to the church and the faithful to be interrupted by my lay vocation. He describes me as a "traveling priest," but that too is wrong. I have been assigned for the past six months to a parish in Keene, New Hampshire, where I have served continuously. I also have served the Greek Orthodox Metropolis of Boston without interruption for the last 18 months.
3.) He maligns my lay vocation as a hedge fund manager with an allegation that the hedge fund industry "operates with almost no official scrutiny." That's also not true. The Amvona Fund, LP, like all funds in the industry, is regulated by the Securities and Exchange Commission (SEC) and we adhere rigorously to its extensive reporting, accountability and transparency standards. This year, we expect to spend at least $70,000 on outside legal and compliance fees to ensure we meet these regulatory requirements. We also are governed by numerous state regulations where we have investors.
4.) Mr. Copeland oddly and inaccurately charges that I "live a distinct double life." That would be surprising to anyone who knows me professionally or personally. My investors and hedge fund colleagues are fully aware of and have been supportive of my role in the Greek Orthodox Church, while my work as a hedge fund manager and as founder and president of The Lantern Foundation has been encouraged by the church. In fact, I even stated in my taped interview with The Wall Street Journal, in response to a question, that I am not living a double life and that every aspect of my life has been completely open to all. No aspect of my life is secret, illegal or immoral, or otherwise representative of anything warranting the disparaging label of someone "living a double life," as Mr. Copeland wrongly reports.
5.) He writes inaccurately that I am a disciple of Warren Buffett, who he heretically labels a "near deity." In fact, as I state clearly in the video interview I conducted with The Wall Street Journal (but which was omitted from The Wall Street Journal's final video edit), I do not agree with Buffett, much less consider myself a "disciple" of him. By using theological terms such as "deities" and "disciples" to describe secular topics, he demeans my religion and person.
Mr. Copeland writes that The Amvona Fund charges a performance fee that "is well above the hedge fund norm." That's also not true. But it is true (which he fails to report) that The Amvona Fund management fee of a mere one percent (which does not even cover the full expense of operating the general partner) is considerably below industry averages, which are roughly twice that of The Amvona Fund. Additionally, in attempting to wrongly depict the fund as having higher than normal fees, he fails to mention that the fund's performance allocation is subject to an extremely investor-friendly six percent hurdle rate, which is nearly unheard of in the industry.
6.) He writes that The Amvona Fund "usually wagers on relatively unknown individual stocks rising." That's also inaccurate. Every single one of the fund's long investments is in public equities traded on one of the world's two major stock exchanges, the New York Stock Exchange (NYSE) and NASDAQ. Additionally, the overwhelming proportion of the fund's realized and unrealized gains have come either from highly successful investments in highly recognizable large-capitalization stocks or from selling short common equities.
7.) I have never said I was "eager to expand," as Mr. Copeland inaccurately reports. In fact, I have said repeatedly that the fund has long considered closing to new investors (see "High-Flying Fund May Bar Entry, Hedge Fund Alert, August 20, 2014, for instance). Then, instead of simply reporting that The Amvona Fund was ranked number one in its performance category, he reports on this fact in a manner apparently designed to cast doubt on its accuracy. He cites what he labels our "unusual step" of issuing a press release on the designation, which is not at all unusual (investment firms routinely announce their performance awards and designations). He also wrongly reports that we stated in this press release that The Amvona Fund was "among the top five funds in the BarclayHedge database that ranks hedge fund managers by their performance." But neither that phrase, nor any reference to any "top five" designation, appears anywhere in the press release or BarclayHedge's results report he references.
8.) Mr. Copeland wrongly describes the fund's largest position, Apple, Inc. as "under fire." In fact, year-to-date through the day of Mr. Copeland's article, Apple has outperformed the benchmark S & P 500 by nine-fold (863%). He writes that The Amvona Fund is now suffering its "first extended period of losses, people familiar with the matter said." No such people exist. No one beyond myself, as the fund's manager, has interim performance results, and the fund's performance is not reported publicly or selectively to anyone until the respective reporting period has ended. Either the source Mr. Copeland references is contrived by him, or is misleadingly representing having access to information not in their possession.
9.) I have never indicated to investors, as Mr. Copeland reports, that they must follow two rules: "pray for the fund and disregard short-term performance." He also states that I refused to provide him with The Amvona Fund's performance since June 2015. That is true but not at all unusual and entirely consistent with our standard performance reporting practices, as he was made aware. The fund reports its results semi-annually and does not, as most funds do not, provide piecemeal results for its reporting periods. But Mr. Copeland instead attempts to project that I am somehow concealing performance results from him or the public, which obviously is not the case. Our second half 2015 results will be released shortly following the completion of the performance period on December 31, in keeping with our performance disclosure schedule. The performance for all of our previous reporting periods has been announced and released publicly and was readily available to Mr. Copeland.
10.) He writes inaccurately that I "was ordained years later by a Turkish archbishop, who later invested his church's money in The Amvona Fund." The archbishop has never invested in the fund. Additionally, he bestows the title of "Turkish Archbishop" on the archbishop, a position that does not even exist.
11.) Mr. Copeland went to extensive lengths to interview many of my colleagues in the fields of finance, investing and faith--and then proceeded to quote almost none of them. He instead found an obscure Nashville, Tennessee-based academic who I have never met and knows nothing of me or my work and has no affiliation with the investment profession or the Greek Orthodox Church to provide an inaccurate and critical view about the combination of my two professions. This academic subsequently emailed me, stating that his quote had been "skewed" by Mr. Copeland. Interestingly, the university with which this academic is affiliated, Vanderbilt University, has repeatedly expressed interest in potentially investing in The Amvona Fund.
12.) He goes to great lengths to wrongly malign me inaccurately as materialistic, reporting incorrectly that I "collect motorcycles." I have one motorcycle given to me as a gift by my wife and am not now and have never been a collector of motorcycles. Even more troubling, there was no room for misinterpretation of this fact. It was pointed out to him both in our interviews and in subsequent email communication.
This effort to depict me inaccurately as living some sort of lavish life, presumably conflicting with my role as a religious authority, is further debunked by the very interview The Wall Street Journal filmed. In it, I spoke of how little our home in Southborough means to us, and how much happier we were living in a modest home in Switzerland up until last year that had no modern amenities. I further cited St. John Chrysostom, a father of the Church, who taught that "wealth is not the problem, but the arrogance that often accompanies it, and conversely poverty is not a blessing, but the humility which often accompanies it is." Yet these quotes were also omitted, so that a "skewed" quote from someone who never met me could suggest I had overlooked the church fathers could be included.
Building further on this inaccurate depiction of me, he quotes me as saying, "Let's not be poor because we're pretending to be pious, when we really just couldn't figure out how to make a better living." I never said that.
13.) Mr. Copeland references 2004 litigation, writing that my company, Amvona, "accepted an offer of judgment against it and paid to end the case, court documents show." That also is false. Amvona did not pay to settle the matter. Amvona was ultimately paid $100,000 to resolve the dispute, and those proceeds were subsequently donated to charity. Mr. Copeland was provided with all of the documents necessary to report correctly on this matter and simply chose not to (see "Amvona Pledges Award to Charity," February 22, 2013).
14.) I never referred to my work in security analysis and writing on investment philosophy, as he reports, as "a hedge fund gig." Mr. Copeland quotes me as saying: "They are going to have to bar me from the securities markets because I would make too much money." I never said this either, and it seems to be part of a broader misrepresentation projected throughout the article of my compensation as The Amvona Fund's chief investment officer.
There also was no room for misinterpretation regarding my compensation. As was made aware to Mr. Copeland both verbally, by email and in KPMG-audited financial statements provided to him (but which he chose to omit citing), my entire and only compensation as the fund's chief investment officer is my compensation of $100,000 annually, which (after taxes) is roughly $60,000 annually. I receive no performance or other compensation from the fund and likely am (by design) one of the world's lowest compensated hedge fund managers in the industry (even though our fund is among its top performing). There is good reason for this too: My motivation for starting The Amvona Fund was never to accumulate wealth for myself but to use my investment knowledge and skills to help those who have invested in the fund by teaching, and to earn enough so that I may be able to serve parishes that cannot afford a regular priest. These motivations are clearly outlined in the Fund's 2012 annual report, which also was provided to Mr. Copeland.
I am not aware of any "techniques" from "corporate raiders in decades past," as Mr. Copeland reports, so this comment too is contrived by Mr. Copeland to meet the larger inaccurate depiction he sought to report.
This is an extraordinarily error-laden article that projects an utterly inaccurate view of The Amvona Fund, LP and its manager. Not mentioned by Mr. Copeland: Amongst other recognitions, The Amvona Fund has twice been named by Barron's (owned by the The Wall Street Journal's parent company) as the world's top performing hedge fund, or that our compounded annual rate of return since inception through our last reporting period is 38.23 percent net of all fees and expenses, placing The Amvona Fund as one of world's top-performing funds for this period.
+ Emmanuel Lemelson
Benzinga contacted Dow Jones, owner of Wall Street Journal, and a spokesperson said "we stand by our story."
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