Trading & Options · Profile from Trading and Options Research Companion
John W. Henry & Company
The trend-following CTA that John W. Henry started in 1981 with a mechanical system he had first tested on his own money. Through Merrill Lynch, Smith Barney and Refco public futures funds it became one of the best-known names in managed futures. It managed ~$2.3bn of client assets at end-1998 (JWH Global Trust prospectus, 1999) and a reported peak of ~$2.5bn, dated to 2004 by one report and 2006 by another. Its flagship Financial and Metals Portfolio (from October 1984) reported a 36.7% annualised net return from inception to end-1998 (NFA-format prospectus figure, rule 4(c)). It also suffered deep drawdowns: −30.5% in 1994–95 in that programme and close to 60% in one programme on a composite basis (prospectus). 1999 was "the most difficult year in the firm's 18 year history" (JWH Global Trust 10-K). From 2005 to 2007 its funds lost money three years running; Merrill Lynch withdrew its clients and assets fell about 80% within a year (WSJ, reported, 2007). The firm made 40–90% in 2008 but could not rebuild. On 9 Nov 2012 it said it would stop managing client money at year-end, with under $100m left. Meanwhile Henry had become principal owner of the Boston Red Sox (bought for $700m in 2002 with Tom Werner and partners, Reuters) and, through Fenway Sports Group, Liverpool FC (Oct 2010). His fortune came from sports ownership more than from trading. JWH's story turns on trend-following decay and business fragility: a single-founder system, sold through brokers at high fees, whose clients left in the drawdown before the payoff.
At a glance
- Founded
- CTA registration effective Nov 1980; began managing client assets in 1981 as a sole proprietorship (JWH Global Trust prospectus, 1999). Wikipedia gives 1981; a Boston Business Journal piece gives 1982. The Original Investment Program began trading client capital in Oct 1982
- Headquarters
- Irvine, California (1981); Newport Beach (1983); Westport, Connecticut (1989); Boca Raton, Florida (by 2012) (Wikipedia; Reuters). Reincorporated in Florida in 1997 (prospectus)
- Ownership / structure
- Private; sole shareholder the John W. Henry Trust, of which Henry was trustee and sole beneficiary (prospectus, 1999)
- Leadership
- John W. Henry (chairman); Verne Sedlacek, president and COO from Jul 1998 (ex-CFO of Harvard Management Co.); Mark S. Rzepczynski, joined May 1998, president and CIO from 1 Jan 2002; Kevin Koshi (proprietary trading, from 1988); Matthew Driscoll (chief trader, from 1991) (prospectus; JWH Global Trust 10-K FY2001)
- Programmes
- Original Investment Program (Oct 1982); Financial and Metals Portfolio (Oct 1984); G-7 Currency Portfolio (Feb 1991); Global Financial Portfolio; International Foreign Exchange; GlobalAnalytics (replaced the Original Investment Program in JWH Global Trust from Jan 2000); Strategic Allocation Program (multi-programme); Global Diversified (Jul 2006); JWH Diversified Plus (2008) (prospectus; 10-Ks)
- Scale (dated, reported)
- ~$2.3bn client assets end-1998 (prospectus). Peak ~$2.5bn: 2004 (HedgeCo, Nov 2009, citing the Boston Globe) or 2006 (WSJ, Nov 2012). ~$500m by mid-2007 (WSJ, reported). $297m at end-2007 (secondary, Low). $188m directly plus ~$200m co-managed (Nov 2009). Under $100m (late 2012)
- Regulators
- CFTC and NFA (CTA registration Nov 1980); the public funds it advised filed with the SEC. No enforcement action against JWH was found in the sources checked (NFA BASIC not queried — verify)
- Signature moves (incl. failures)
- Founding with a mechanical trend system (1981). The Financial and Metals Portfolio (1984). Broker-sold public funds (Merrill Lynch, Smith Barney, Refco; 1990s). The 1999 worst year and the 2000 programme and fee reset. The Red Sox and the sports turn (2002–). The 2005–07 drawdown and Merrill's exit. The 2008 rebound and redemptions. Closing to outside money (2012)
8 strategic moves analysed
Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.
1981
Founding and the Mechanical Trend System
Founding
1984
Financial and Metals Portfolio
New strategy / product
1996
Broker Sold Public Funds
Distribution / capital raise through sponsors' public futures funds
1999
Worst Year and the 2000 Reset
Loss and drawdown response; programme and fee change
2002
Red Sox and the Sports Turn
Key-person change: the founder's capital and attention move to sports ownership
2005
Drawdown and the Merrill Exit
Loss and drawdown (failure); loss of the main distributor
2008
Crisis Rebound and Redemptions
Outcome / restructuring (staff cuts)
2012
Closing to Outside Money
Closing a business to clients (continuing proprietary trading)