BOSTON, Aug 7 (Reuters) - Investor Jeffrey Tarrant, whose firm Protege Partners backed billionaire managers including William Ackman and Marc Lasry early in their careers and made a bet with Warren Buffett that hedge funds would outperform a passive index fund, has died at age 63.
Tarrant died on Aug. 5 at his home in Bridgehampton, New York, his firm said, giving the cause of death as brain cancer.
Over 17 years, Tarrant turned Protege Partners into a powerful backer of small hedge funds, often identifying and seeding portfolios before they became widely known and successful. Protege was the biggest early investor with John Paulson’s Credit Opportunities Fund that bet against subprime mortgages and earned Paulson & Co. $15 billion in 2007.
Academic research has shown that smaller firms tend to perform better than large ones and Tarrant, and his team, scoured the world for firms just starting out and ones that had been overlooked. Small firms, he argued, could help diversify big portfolios with niche strategies that were often uncorrelated to the markets.
“Jeff had a gift for thinking ahead of industry trends and had an irrepressible entrepreneurial spirit,” said Ted Seides who co-founded Protege with Tarrant in 2001.
“From the first database for hedge funds, early seeding of managers and shorting credit and subprime before the financial crisis, to his most recent passion for machine learning, Jeff held forward-thinking original ideas and a drive to bring them to fruition,” added Seides, who hosts Capital Allocators podcast.
Two years ago Tarrant was diagnosed and treated for brain cancer. He stepped back from day-to-day management and moved into a newly created role of chairman, appointing Carol O’Donnell, who had been the firm’s chief compliance officer, as chief executive officer.
At the height of the financial crisis, Tarrant and Seides in 2008 made a $1 million bet with Warren Buffett, long considered one of the world’s most successful investors, that their basket of chosen hedge funds would outperform a Standard & Poor’s 500 stock index fund over 10 years. They lost. Still Tarrant told the Financial Times in 2017 that he felt he had won given all the access he had to Buffett over the decade.
Tarrant graduated from Harvard Business School and co-managed the Sequoia Fund, a prominent portfolio, early in his career. He is survived by two daughters and two sisters. (Reporting by Svea Herbst-Bayliss and additional reporting by Lawrence Delevingne in New York; Editing by David Gregorio)