A fascinating new profile in the Wall Street Journal details the rise and fall of Wellington Management’s Nick Adams, who went from averaging 28% annual returns by investing in traditional bank stocks to losing billions on two really bad bets on fintech startups.
The feature, written by the Journal‘s Rob Copeland and Peter Rudegeair, explains how Adams “poured hundreds of millions of dollars into two tech startups, Mozido Inc. and Powa Technologies Group PLC, and told investors they were growing ever more valuable, boosting his fees,” only to watch as both companies have lost money. In fact, Copeland and Rudegeair report that when Adams and Wellington invested in Mozido in 2014, the company had “posted a loss of $34 million on revenue that was only 2% of what had been forecast,” while Powa – which “rented prime office space in New York and London and hosted raucous company parties, including one that featured strippers in neon paint” – has now filed for the equivalent of bankruptcy in a U.K. court.
Mozido is an Austin, Texas-based company that “makes software that allows consumers, particularly those without bank accounts, to send and receive money with cellular telephones,” the Journal notes. Powa built “a smartphone app that allowed shoppers to make instant purchases by scanning bar codes on advertisements.”
Adams has written an apology to investors, calling the Powa investment “one of the most disappointing investments in my more than 30+ years of investing.” His flagship Bay Pond fund – the first hedge fund Wellington ever launched – was down 7% last year, while two “smaller funds concentrated in startup stakes were down by double-digit percentages,” according to the Journal.
Wellington is trying to now staunch the bleeding.
Wellington has been urging investors to stick around, according to people who have heard from the firm. Mr. Adams has made dozens of calls to clients. Wellington has told investors in writing that Mr. Adams had “forsworn” ever again investing in such private deals in his flagship fund.
Several large investors pulled their money, including the Blackstone Group LP, one of the world’s largest hedge-fund investors. By the beginning of this year, Mr. Adams’s portfolio at Wellington had shrunk to about $6 billion, down roughly 40% from its peak in 2014, reflecting both investor withdrawals and investment declines, according to people familiar with the firm’s finances.
Along with its blow-by-blow account of how Adams lost his way, Copeland and Rudegeair include some choice nuggets about the hedge fund manager:
- Adams is a direct descendant of John Adams, the second president of the United States.
- He owns a potbellied pig named Mona Lisa, “that he walks outdoors on a leash and takes with him on private jet flights.” He also convinced the Boston Ritz-Carlton, “where he keeps an apartment, to waive its policy against pigs by describing Mona Lisa as a therapy animal, people familiar with the matter say.”
- Adams divorced his wife and married his first cousin.
- His great-grandfather founded the Boston Bruins, a National Hockey League team.
At the very least, Adams has an intriguing enough life story to get started writing his memoirs.
Photo: Public Domain