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Steven Syre | Boston Capital

A $9.5b nonbusiness

Email|Print|Single Page| Text size + By Steven Syre
Globe Columnist / May 20, 2008

A financial news update: Jeff Vinik still isn't in the investment management business.

That's getting harder to fathom all the time. The latest financial reports from Vinik Asset Management, the Boston hedge fund firm that closed its doors and gave clients their money back nearly eight years ago, reflect investment operations that are bigger than ever.

Those reports show Vinik, once the manager of the giant Fidelity Magellan mutual fund, and four other managers at his hedge fund firm were investing $9.5 billion in stocks on March 31.

A portfolio managed by Vinik personally accounted for $6.8 billion of the total.

So how much is $9.5 billion in the hedge fund world?

Another leading Boston hedge fund firm, Highfields Capital Management, reported a stock portfolio of $7.8 billion on the same date.

At the time Vinik Asset Management closed its doors in 2000, the firm planned to return $4.2 billion to clients. Now it's managing more than twice that amount.

As usual, Vinik himself was not available for comment yesterday. And no one else was prepared to take my millions, even if I actually had them to give.

"We're not open for business, and we haven't been open," a spokesman for the firm confirmed.

How can that be? Though Vinik Asset Management got out of the actual hedge fund business, the organization did not disappear. The firm remained in operation for its principals to invest their own money as well as the accounts of friends and family.

And that meant Vinik Asset Management had to file quarterly portfolio disclosure reports with the Securities and Exchange Commission, just as if it was still in business.

Those reports remained thin for several years after the firm closed for business, relatively small amounts of money that traded infrequently and was often invested in mutual funds. Over time, the amount of money reported each quarter grew, and the trading activity picked up steam.

But recent quarterly reports by Vinik Asset Management have eclipsed anything it has ever filed. The firm's assets grew by nearly 50 percent, from $6.4 billion, in the first three months of this year. Vinik Asset Management reported portfolios worth $5.5 billion on March 31 last year. The firm's reported assets were below $2 billion as recently as mid-2006.

Public reports on hedge fund portfolios can be misleading because of all the things they do not include. A hedge fund firm may have borrowed heavily to create its stock portfolio, a fact that is not disclosed or described. Short positions, or bets against individual stocks, are not reported. Neither are most other kinds of investments that don't involve stocks. The real size of a hedge fund operation could be considerably larger or smaller than it appears in its quarterly disclosure report.

But firms like Vinik Asset Management still own the stocks they report in their portfolios every three months.

And Jeff Vinik owned a lot of stocks on March 31, more than 250 in all. As usual, he remains an active trader who often moves in and out of big stock positions quarter by quarter. What was true at the end of March may be way out of date today.

Vinik's largest stock investment at the end of the last quarter was the Swiss company ABB Ltd., the world's largest builder of electricity systems. He owned about $147 million worth of the shares.

Google Inc., a longtime Vinik favorite, was second in the portfolio, with shares worth about $145 million. Research in Motion Ltd. was third in the Vinik portfolio, with holdings worth $120 million.

Other stocks in Vinik's top 10 included Manitowok Inc., FTI Consulting Inc., First Solar Inc., Cummins Inc., Charles Schwab Corp., Norfolk Southern Corp., and Steel Dynamics Inc.

Stock holdings that fell out of the firm's top group during the quarter were State Street Corp., Foster Wheeler Ltd., Transocean Inc., Goldman Sachs Group Inc., and Tempur Pedic International.

So Jeff Vinik and his hedge fund colleagues are very active investors. They're just not in the investment business.

That's what they say.

But you have to wonder, who are these friends with so many billions of dollars to invest?

And, will they be my friends, too?

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

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