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Matthias Knab, Opalesque for New Managers:

O'Connor portfolio manager built a consumer and TMT-focused long/short fund that generates most of its alpha from shorting - with a 1.1 Sharpe ratio and 0.3 correlation to the S&P 500.

In an industry where "equity long/short" has largely become a euphemism for long-bias stock picking with some hedging on top, Jonathan Jacoby and his team at Tabor Asset Management are running a genuinely low net (almost market-neutral) book. With single-digit beta-adjusted net exposure, a correlation to the S&P 500 of 0.3, and - most unusually - the majority of their inception-to-date alpha generated from the short book, Tabor represents the kind of strategy that institutional allocators claim to want but rarely find: truly uncorrelated returns driven by deep sector expertise on both sides of the ledger.

Launched in February 2019, Tabor has delivered 87% cumulative net returns since inception, compounding through COVID, the 2022 drawdown, the AI-driven rally, and now the post-tariff regime - all while maintaining the kind of risk discipline that defined the multi-manager platforms where Jacoby cut his teeth. But it's the way these returns are generated that makes Tabor worth a closer look.

Born From Multi-Manager DNA

These weren't small operations. UBS O'Connor and Millennium are among the most sophisticated risk management environments in the industry - platforms where portfolio managers live and die by their Sharpe ratios, where drawdown limits are enforced ruthlessly, and where the discipline of running genuinely hedged books isn't optional but existential.

Jacoby took that DNA with him when he founded Tabor. "We believe we can generate better returns with a similar risk philosophy employed at Millennium and UBS O'Connor. Over 90% of my liquid net worth is in the fund as this is the best way I know how to compound capital," he states plainly. That means running a genuinely low net book - not the "we're long-biased but we call ourselves low net" approach that has become endemic to the industry.

The proof is in the portfolio construction: approximately 30-40 long positions against 60-70 shorts, with net exposure constrained to +/-15% and beta to +/-20%. The typical net exposure hovers around just 5%. This isn't a fund that makes money by being long the market - it has to earn its returns through security selection on both sides.

The Short Book: Where Tabor Distinguishes Itself

Over 90% of the short book is in single-name positions - not baskets, not indices, but specific companies where the team has a fundamental thesis for why the stock should decline or underperform. This is the expensive, labor-intensive way to run a short book, requiring deep research into each position. But it's also the only way to generate genuine alpha from the short side.

The results validate the approach. Most of Tabor's inception-to-date alpha has come from the short book. To put that in perspective: generating alpha from shorts is one of the hardest things in professional investing. Equities have a structural upward bias, short positions have asymmetric risk (unlimited losses vs. capped gains), and shorts face the constant headwind of cost to borrow. The fact that Tabor's short book has been the primary alpha driver over a seven-year period that included one of the strongest equity bull markets in history is, frankly, remarkable.

Tabor distinguishes between two types of shorts, each serving a different purpose. Alpha shorts are positions expected to decline in value due to fundamental company-specific issues - the same rigorous research process and 3:1 risk/reward hurdle applied to longs is used in reverse. Hedge shorts are expected to underperform their long counterparts within sub-sectors, expressed as pair trades where Tabor is long the market share gainer and short the market share donor.

The remaining 6-10% of the short book is a custom basket created by Boosted.ai, designed to offset factor exposures in the long book. "Reset monthly, the overlay helps dampen unintended factor exposures while preserving intentional positioning.

For allocators tired of paying hedge fund fees for long-biased equity exposure, this is what genuine hedging looks like.

Consumer and TMT: A Universe Rich Enough for Both Sides

This depth matters because it creates what the team calls "sub-sectors as mini-portfolios." Each sub-sector - video games, restaurants, softlines, building products - is managed as its own small long/short book, typically constrained to +/-15% net. This architecture has two critical advantages.

First, it forces genuine hedging at the sub-sector level. You can't just be "bullish consumer" - you need to identify winners and losers within each niche. The travel sub-portfolio, for example, might hold 2 longs and 4 shorts. This granularity forces the kind of relative value thinking that generates alpha regardless of broader market direction.

Second, it creates natural risk boundaries. If a sub-sector book draws down by 7.5% on a 30-day rolling basis, risk is cut by 33%. In addition to portfolio-level stop-losses that might never be triggered, it's a granular, sub-sector level mechanism that catches problems early.

2026 Investment Insights: Post-Tariff Winners and the Home Improvement Coiled Spring

Within housing, Tabor remains constructive on repair and remodel. Aging housing stock and elevated homeowner tenure support structural R&R demand, with leading indicators suggesting deferred projects are beginning to move toward execution. The firm is focused on building products, home improvement, and furnishings categories tied to R&R activity rather than new construction.

AI remains a two-sided theme in 2026. Rather than chasing crowded AI trades, Tabor focuses on second-order beneficiaries and identifies consumer-facing and B2B information providers vulnerable to AI-driven disruption that has yet to be fully reflected in valuations.

Intellectual Honesty and the "Pothole" Framework

This manifests practically in the short book through what Tabor calls its "pothole" framework. When building short positions, the team systematically identifies potential catalysts for the short thesis to go wrong - and sizes positions according to the estimated probability of each. Current potholes include reignited M&A from a more friendly regulatory environment, aggressive capital deployment by secular decliners whose pandemic-era tailwinds are fading, foreign appetite to gain footholds in high-growth US industries, family businesses lacking succession plans and vulnerable to takeovers, and CEOs with "mogul mentalities" capitalizing on valuation dislocations between large-cap and SMID-cap stocks.

This isn't just risk identification - it's honest self-assessment about what could prove a short thesis wrong, embedded into the sizing process. It's the opposite of confirmation bias, and it's one reason why the short book has been such a consistent alpha contributor.

Three-Prong Risk Management: Not a Marketing Slide

At the portfolio level, gross exposure is reduced by 33% if the overall portfolio breaches a 2.5% drawdown. The team actively monitors and can reduce gross from 10-20% per day in extreme environments - during COVID, they cut gross from 205% to 115% between late February and mid-March 2020, even while generating positive P&L. That's discipline.

At the sub-sector level, each mini-portfolio is monitored for drawdowns on a 30-day rolling basis. If a sub-sector declines by 7.5% of average capital, risk is cut by 33%. There's a formal "re-engagement" process to add back to the sub-sector - but only with analyst conviction.

At the position level, strict stop-loss reductions are enforced when limits are breached. Longs require 3:1 reward/risk to enter the portfolio, and this ratio is continuously re-evaluated as new information enters the market.

Following Q2 2022, a period that tested many equity managers, Tabor materially strengthened its risk and portfolio management framework. The firm moved from month-to-date monitoring to daily oversight using rolling 30-day metrics, tightened portfolio construction with stricter limits on smaller-cap positions and improved downside convexity, refined sector coverage with greater sub-sector granularity, and made personnel changes to realign decision-making with Tabor's core research-driven process.

Factor exposure is monitored through Boosted.ai, with a custom hedge basket created monthly to offset unintended factor leans. The target is 80%+ idiosyncratic risk - meaning the vast majority of portfolio volatility should come from stock-specific outcomes, not market beta or factor tilts.

What Allocators Should Consider

Market neutrality that shows up in the data. A 0.3 correlation to the S&P 500 and 7.8 percent beta-adjusted net exposure indicate returns that are meaningfully distinct from traditional equity portfolios. This is designed to diversify equity risk, not amplify it.

Short-side alpha as the core differentiator. In an environment where long alpha is increasingly crowded, Tabor has generated the majority of its returns from single-name shorts, including through one of the strongest bull markets on record. That profile remains unusual.

Risk management applied in practice. The firm employs a multi-layered framework with explicit triggers at the position, sub-sector, and portfolio levels. Combined with the team's multi-manager platform background, this creates a risk architecture more typical of large institutional platforms than standalone funds.

Deep sector expertise on both sides of the book. A 400-plus name universe across 18 sub-sectors is managed as discrete mini-portfolios, enabling the granular industry insight required to identify both winners and losers within each category.

Demonstrated adaptability post-2022. Following Q2 2022, a period that tested many equity managers, Tabor materially evolved its risk framework, moving from monthly to daily monitoring, adopting rolling 30-day metrics, increasing sub-sector granularity, and tightening portfolio construction.

Consumer-led specialization by design. Consumer and Leisure account for 57.2 percent of inception-to-date attribution, followed by Internet at 13.9 percent. The portfolio is concentrated where the team has the deepest experience and most repeatable edge.

A fertile opportunity set going forward. Consumer and TMT continue to present compelling long and short opportunities, driven by tariff-related disruption, AI-enabled shifts in business models, an improving repair and remodel backdrop within housing, and secular changes across media, entertainment, and retail.

In a market where many hedge funds deliver returns that closely resemble long-only equity exposure with modest hedging, Tabor's disciplined, two-sided approach deserves serious attention.

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This material is provided for informational purposes only and does not constitute an offer or solicitation to invest. Past performance, including references to positive return periods or historical distributions, is not indicative of future results. Targeted yields are not guaranteed. This material is not intended for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to applicable laws or regulations.