Scion Asset Management: Investing In The Right Direction

Scion Asset Management is a private investment firm founded by Dr. Michael J. Burry, who is often referred to as the Big Short investor due to his successful bet against the housing market in 2008, which was depicted in the movie The Big Short. Scion Asset Management has gained popularity due to Dr. Burry's ability to identify undervalued investment opportunities. The firm provides advisory services to four private investment funds, and investors in these funds may include high-net-worth individuals, foundations, trusts, and other entities. To invest in Scion's funds, individuals typically need to meet minimum investment requirements, such as $1 million for the Onshore and Offshore Funds or $500,000 for the Value Fund. However, Scion may accept lower amounts at its discretion and reserves the right to make exceptions to the minimum investment requirements.

Investment funds and requirements

Scion Asset Management, LLC is a private investment firm that provides advisory services to four private investment funds. The firm is led by investing guru Dr. Michael J. Burry, who is known for his ability to identify undervalued investment opportunities worldwide.

Scion Asset Management requires substantial minimum investments for its funds. The Onshore and Offshore Funds necessitate a minimum investment of $1.5 million, while the Value Fund requires $500,000 according to some sources, and $0.5 million according to others. It's important to note that Scion may accept lower amounts at its discretion.

The firm requires each investor in a private fund to be a qualified purchaser, a qualified client, or an accredited investor. An accredited investor typically needs a net worth of $1 million, excluding their primary residence, or an annual income of $200,000 for the last two years.

Scion Asset Management's fees include a management fee of up to 2% annually, deducted monthly from the investor's capital account. Additionally, they may charge an incentive allocation/performance-based fee, earning up to a 20% share in the appreciation amount of each client's account, calculated annually.

Scion's investment philosophy values fundamental research and strives for long-term capital appreciation. They seek undervalued securities and use a range of approaches, including technical and macroeconomic factors, to analyse the stock market. The firm may also employ leverage and derivative strategies to enhance client success rates.

Investment philosophy

Scion Asset Management's investment philosophy is centred around the concept of "value investing". The firm's approach is informed by the book Security Analysis, written by Benjamin Graham and David Dodd in 1934.

Scion Asset Management's founder, Dr. Michael J. Burry, has stated that his investment strategy is "100% based on the concept of a margin of safety". This means that he looks for companies with a share price lower than their intrinsic value, as he believes that the price will eventually rise to match the company's true value.

The firm's investment strategy focuses on long-term capital appreciation, primarily through investments in equities, debt, and derivative instruments globally. Scion may take both "long" and "short" positions, employing both long-term and short-term strategies in individual securities.

Scion's primary approach is fundamental research, seeking undervalued or misunderstood investment opportunities globally. This research incorporates technical, macroeconomic, and tactical approaches to navigate the dynamic securities marketplace. While individual equity investments based on fundamental, value-oriented analysis are a common focus, macro trends and opportunities may also drive investment decisions.

Scion utilises both traditional and proprietary analysis to identify attractive short-selling opportunities, particularly for securities they believe are overvalued or facing technical factors that will depress their prices. However, they are not required to engage in short selling or utilise hedging techniques.

The firm does not differentiate between small-caps, mid-caps, tech stocks, or non-tech stocks. Instead, they focus on finding undervalued elements in any sector or class. Because the essence of financial metrics shifts by industry and each company's place in the economic cycle, Scion uses the ratio of enterprise value (EV) to EBITDA when researching investment ideas.

Scion disregards price-to-earnings ratios to avoid being deceived by a company's stated metrics, as these can be misleading based on the underlying state of the economy and macros that may benefit or harm the company. Instead, they pay attention to off-balance sheet metrics and free cash flow.

Investment strategy

Scion Asset Management, LLC, founded in 2013, is a private investment firm that provides advisory services to four private investment funds. The firm does not manage money for individual clients. Instead, it caters to a small group of high-net-worth individuals and organisations.

The firm's investment strategy is led by Dr. Michael J. Burry, often referred to as the "Big Short" investor due to his successful bet against the housing market in 2008. Dr. Burry is known for his ability to identify undervalued investment opportunities globally.

Scion Asset Management's investment philosophy is centred around the concept of "value investing". The firm conducts fundamental research and strives for long-term capital appreciation. They seek out undervalued securities by analysing the stock market from various approaches, including technical and macroeconomic factors.

Dr. Burry's investment strategy does not differentiate between small-caps, mid-caps, tech stocks, or non-tech stocks. Instead, he focuses on finding undervalued elements in companies regardless of their sector and class. To identify investment opportunities, he utilises the ratio of enterprise value (EV) to EBITDA, paying attention to off-balance sheet metrics and free cash flow.

The firm may invest in a diverse range of securities, including equities, exchange-traded funds (ETFs), government securities, corporate debt, convertible securities, options, warrants, equity swaps, credit default swaps, and derivative instruments.

Scion Asset Management also employs leverage and derivative strategies to increase the success rate of their clients' portfolios. They believe in using fundamental analysis methods to assess market conditions holistically and work to identify, measure, and observe any risks that may affect their clients' investments.

Investment portfolio

Scion Asset Management, LLC is a private investment firm founded by Dr. Michael J. Burry, also known as the "Big Short" investor. The firm provides advisory services to four private investment funds and does not manage money for individual clients.

Scion Asset Management's investment philosophy centres around identifying undervalued securities and striving for long-term capital appreciation. The firm may invest in a diverse range of securities, including equities, exchange-traded funds (ETFs), government securities, corporate debt, and derivative instruments.

Scion Master G7, L.P. (the "Master Fund")

This is a Cayman Islands exempted limited partnership, one of the four private investment funds advised by Scion Asset Management. The fund typically requires a minimum investment of $1 million and caters to high-net-worth individuals, foundations, trusts, and other entities.

Scion G7, L.P. (the "Onshore Fund")

The Onshore Fund is a Delaware limited partnership, another one of the four main funds advised by Scion Asset Management. Similar to the Master Fund, it also usually requires a minimum investment of $1 million.

Scion G7 Offshore, Ltd. (the "Offshore Fund")

The Offshore Fund is a Cayman Islands exempted company, following the same investment strategy as the previous two funds. This fund also typically requires a $1 million minimum investment.

Scion Value G7, L.P. (the "Value Fund")

The Value Fund is the fourth fund advised by Scion Asset Management and is a Delaware limited partnership. This fund has a lower minimum investment requirement of $500,000, providing an option for investors who cannot meet the higher threshold of the other funds.

It is important to note that Scion Asset Management may accept lower investment amounts at its discretion and that all investors must be accredited, qualified purchasers, or qualified clients.

While the specific holdings of Scion Asset Management may vary over time, here are some notable investments mentioned in recent sources:

• JD.com, Inc. (JD) - Accounting for 12.2% of its public equity portfolio, JD.com is a leading Chinese e-commerce company known for its advanced logistics infrastructure and technology integration.
• Alibaba Group Holding - Alibaba is a global technology and e-commerce giant, with a presence in cloud computing, digital entertainment, and financial technology. It accounts for 10.2% of Scion's equity holdings.
• HCA Healthcare - A leading player in the healthcare industry, providing a wide range of medical services and contributing to advancements in healthcare practices. HCA makes up 8.2% of Scion's equity holdings.
• Citigroup - A global financial institution offering a range of services, from everyday banking to investment banking. Citigroup is Scion's fourth-largest holding, accounting for 8.1% of its equity holdings.
• The Cigna Group (CI) - A global health services organization providing comprehensive health insurance products and services to individuals, employers, and government entities. Cigna is Scion's fifth-largest holding, making up about 6.9% of its public equity holdings.
• Scorpio Tankers Inc. (STNG)
• Marinus Pharmaceuticals Inc (MRNS)
• Golden Ocean Group Ltd (GOGL)
• CVS Health Corp. (CVS)
• SunCoke Energy Inc (SXC)
• ARK Innovation ETF (ARKK) - Scion has a significant short position against this fund.
• Tesla Motors Inc. (TSLA) - Scion has put options against Tesla, with Michael Burry predicting a decline in the company's stock value.

These holdings demonstrate Scion Asset Management's diverse approach to investing, covering various sectors and industries.

Investment performance

Scion Asset Management, LLC, is a private investment firm founded by Dr. Michael J. Burry, often referred to as the "Big Short" investor. The firm provides advisory services to four private investment funds and does not manage money for individual clients.

The fund's performance has been impressive, with a focus on identifying undervalued investment opportunities globally. Scion Asset Management's investment strategy has resulted in significant financial success, with Burry's accurate predictions about the 2008 housing market bubble and his recent stake in GameStop soaring nearly 1,500% in early 2021.

Investors who followed the company's 13F filings over the last three years (from mid-2021 to mid-2024) would have generated annualized total returns of 20.0%, outperforming the S&P 500 ETF (SPY), which generated 9.9% returns during the same period.

The hedge fund recorded returns of 489.34% (net of fees and expenses) between its inception in November 2000 and June 2008, while the S&P 500 returned just under 3% during the same period.

Scion Asset Management's investment philosophy is summarised by the concept of "Value Investing". This approach involves seeking out undervalued securities and conducting fundamental research to strive for long-term capital appreciation. The firm may invest in a range of securities, including equities, exchange-traded funds (ETFs), government securities, corporate debt, options, and derivative instruments.

The firm charges an asset-based management fee of up to 2% per year and may take up to a 20% share in the appreciation amount of each client's account as an incentive allocation fee.

Michael Burry's personal investment strategy includes short-selling and put options. He has been known to make educated bets against the market, such as his prediction of the 2008 housing market collapse and his belief that Tesla stock will decline.

Overall, Scion Asset Management's investment performance has been strong, with a unique investment strategy that has resulted in significant financial gains for its clients.

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