Yaupon Capital Management / Yaupon Flagship Fund: Hedge Fund Diligence (First Pass)

Prepared 2026-10-20 from the 57 files in sources/. The newest evidence is the 4Q25 investor letter (dated "January 7, 2025" on its first page, which is evidently a typo for 2026), the December 2025 fact sheet and the November 2025 DDQ and offering documents. Everything here is therefore about ten months old. No 2026 performance, AUM or team data was available. There is no Coverage File for this fund. Four files sit outside sources/ (Yaupon webinar 2026.01.pdf, Yaupon DD 2025.03.xlsx, Yaupon_PGA 2025.03.xlsx, Yaupon Monthly.xlsx). Under the project rules they are not evidence and were not used. If the January 2026 webinar is a manager document, moving it into sources/ would extend the record by a month. This is a first-pass note, not full investment diligence, not ODD, and not a recommendation.

Source key: [DDQ25] DDQ, Nov 2025 · [DDQ24] DDQ, Oct 2024 · [CEM25] Confidential Explanatory Memorandum, Yaupon Fund (CI) Ltd., Nov 2025 (plus redline vs Dec 2024) · [LPA25] Master Fund LPA, 17 Nov 2025 (plus redline) · [Data25] YCM Data workbook, through Nov 2025 (monthly returns, attribution, exposure, AUM) · [FS-Dec25] Flagship fact sheet, Dec 2025 · [Deck25] "Yaupon Funds" presentation, Jan 2025 · [Web25] Investor webinar, 11 Dec 2025 · [L4Q18]–[L4Q25] quarterly investor letters, 4Q18–4Q25 (29 letters). Page numbers are PDF pages.

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1. First Impression

What it is. Yaupon is a New York energy-sector long/short fund founded in February 2018 by Steve Pattyn, previously the energy and utilities sector head at Och-Ziff [DDQ25 pp.5, 35]. It trades equities, credit and commodities across three sleeves: energy transition, traditional energy and utilities. It runs low net exposure and high gross: since inception gross has averaged about 291% and net about 7%, with a typical net range of (30%) to +30% [DDQ25 pp.18, 21]. Strategy AUM was $1,757M on 1 Jan 2026. Of that, $1,139M sits in the Flagship feeders and roughly $618M in the Enhanced vehicles, which run about 1.5x Flagship exposure [FS-Dec25 p.1]. All vehicles are soft-closed, and the firm runs a capacity queue [DDQ25 p.12; L4Q25 p.1].

Why it may be worth a meeting.

• Long record with no restatements. The record runs seven years and three months (Oct 2018 to Dec 2025): 16.7% annualized net for the Series A pro-forma class and 17.7% for Founders [L4Q25 p.30]. Monthly figures in the Nov 2025 data workbook match the Mar 2025 workbook exactly. Cumulative figures quoted in the 4Q22, 1Q22, 4Q23 and 3Q24 letters reconcile to the same monthly series. Founders returns are audited through FY2024 [Data25].
• Recent profile is low-volatility and steady. From 2022 to 2025 the fund returned 11.7% a year with about 5.5% annualized monthly volatility and a worst month of -1.6% (my calculation from [Data25] plus the Dec 2025 fact sheet). The deepest decline since 2020 was -3.9% (May to Aug 2024). Over the same years XLE gained 64% in 2022 and ICLN lost about 25% in each of 2023 and 2024.
• Institutional build-out. The firm has grown to about 20 staff [L4Q25 p.5]. Service providers are top-tier: Northern Trust (admin and custody), EY, three prime brokers (JPM, GS, Citi), Kroll as valuation agent, two independent Cayman directors and a Governance Committee with a disinterested majority [DDQ25 pp.7–11; CEM25 p.10].

What is unclear, and the biggest gaps:

• Two different return regimes. 2018–2021 delivered 23% a year at about 20% volatility, with -20.7% peak-to-trough (Apr 2019 to Mar 2020). Most of that came from 2020–21, when the energy-transition book carried up to +51% net long into a year in which ICLN rose 142% (§4). Since 2022 the fund has been near sector-neutral and returns have roughly halved. The deck's targets of 18–22% net at 12–15% volatility [Deck25 p.7] describe neither regime well.
• Equity shorts have lost money in most years. Gross equity-short attribution was negative in five of the seven full calendar years, about -48 points cumulatively, simple sum (§4). Short-side alpha net of beta is unproven on the evidence in hand.
• Capacity creep through a second vehicle. In 2022 Yaupon said it would soft-close at $750M [L2Q22 p.22]. It then launched a 1.5x-levered Enhanced fund in July 2024 [L2Q24 p.1]. My estimate of combined gross market value is about $6B (§6).
• Key-person concentration. Pattyn is "primarily responsible for investment decisions," approves the daily blotter, and is the sole key-person trigger [DDQ25 pp.14, 22]. Three of the investment staff named as present since launch have left: commodities in 2019, utilities in 2022, and a managing director in 2025.
• Unquantified items. GP and employee capital is not quantified. The Strategic Investor's fee share and identity are undisclosed. The pass-through expense ratio is not provided (§3).

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2. Team

Departures documented in the sources.

• Michelle Brouhard, commodities lead from launch, left in 4Q19 [L4Q19 p.12].
• Myles McGreavy, utilities "since our inception", left in 1Q22 [L1Q22 p.24].
• Corey Goldman, a 2018 senior analyst promoted to MD in 2024 who covered advanced fuels, chemicals, midstream and downstream, left in 2Q25 [DDQ24; L2Q25 p.29]. He was absent from the Nov 2025 DDQ list. The Florida office listed in Oct 2024 was also gone by Nov 2025 [DDQ24 vs DDQ25 p.8].

Read. This is a CIO-centric firm with a growing bench. Equity ownership is limited to Pattyn, Burkley and Lebowitz [DDQ25 p.5]. Each senior departure so far has been backfilled with a more junior hire. The 2025 promotions of two MDs and a partner are a retention signal, but none of the three is stated to hold equity. The key-person clause is tied to Pattyn alone: incapacity, or more than 60 days out of management, triggers a 30-day window for ungated withdrawal [DDQ25 p.14; LPA25].

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3. Terms, Liquidity and Alignment

Sources: [DDQ25 pp.12–13; CEM25 pp.4–10]. No side pockets [DDQ25 p.14]. In-kind and liquidating-vehicle distributions are permitted [CEM25 p.10]. New in the Nov 2025 documents: AUD-denominated sub-classes with a USD-equivalent $10M minimum [CEM25 pp.4–5; LPA25 p.4].

Alignment facts.

• Pattyn "has invested the majority of his liquid net worth in the Funds" [DDQ25 p.16]. No dollar amount or percentage of AUM is given. An employee vehicle, Yaupon AV LLC, exists [DDQ25 p.6].
• Strategic Investor (seed). An early, significant investor in the US feeder with an initial three-year lock-up. It receives a portion of management and incentive fees across both Flagship and Enhanced, plus MFN, tag-along and drag-along rights and AUM-based preferential rates. It holds no equity in the manager and has no extra transparency or liquidity [DDQ25 pp.14–15; CEM25 p.7]. Its identity, its share of economics and any sunset are not disclosed.
• Fees can be waived or rebated for insiders and for "large or strategic investors". Side letters exist, but the manager states that none grant better liquidity or transparency [DDQ25 p.15; CEM25 pp.5–6]. Side letters require Governance Committee consent [LPA25].
• Expenses are broadly passed through. The fund bears research (third-party research, Bloomberg and data services, research travel), risk and OMS software, compliance consultants, middle office, and 75% of the manager's D&O/E&O premium [DDQ25 p.8; CEM25 p.8]. Soft dollars and a commission-sharing agreement are in use [DDQ25 p.15]. The total expense ratio is not disclosed in the reviewed materials and is a primary gap.
• Trade-error losses are borne by the fund absent gross negligence, and the LPA indemnifies losses from trade errors [DDQ25 p.23; LPA25].

Read. The headline fees are standard. The four-quarter gate makes a full exit a roughly one-year process, which suits a book that is about 93% liquid within 30 days [FS-Dec25 p.3]. The open alignment questions are the size of GP and employee capital, the economics paid away to the Strategic Investor, and the all-in cost after pass-throughs.

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4. Performance and Drawdowns

Series A Unrestricted is pro-forma before Dec 2022: the actual Founders returns are re-stated at 1.75%/20%. Unrestricted interests participate in IPOs ("new issues"), which the manager says were "particularly material for 2019" [Data25 notes]. 2025 is unaudited.

Source: [L4Q25 p.30; Data25]. Enhanced A returned 26.2% in 2025 [L4Q25 p.1].

My calculations from the monthly series (Data25 plus the Dec 2025 fact sheet, Series A):

• 2018–21: 23.0% annualized, 19.7% annualized monthly volatility, worst month -16.5% (Mar 2020).
• 2022–25: 11.7% annualized, 5.5% volatility, worst month -1.6%. Positive months: 74% in 2018–21 and 69% in 2022–25.
• The manager reports ITD volatility of 9.8% [FS-Dec25] on an "average of daily 30-day trailing vol" basis. The standard deviation of monthly returns is 13.9% ITD. The manager's method mutes months like March and April 2020, so ask for monthly-based risk statistics.

Drawdowns.

• Feb 2019 (-7.1%) and Apr 2019–Mar 2020 (-20.7%, recovered Jul 2020). Q3 2019 lost 7.3%, "the majority" from E&P longs, which the manager answered with gross cuts and subsector rotation [L3Q19 p.2]. March 2020 lost 16.6% in about three weeks. Three causes were cited. First, the manager kept a net-long utilities book as a "defensive" offset, and it saw unprecedented volatility ("in hindsight, we were wrong on both accounts"). Second, energy credit was bought into the selloff and fell further. Third, energy equity longs suffered in the COVID and OPEC+ shock [L1Q20 pp.2, 5]. At quarter-end, net exposure was 36.9% on 204% gross [L1Q20 p.3], above the stated typical ±30% net range. The quarter was explained candidly and recovered quickly: +15.8% in April, and +47.9% for 2020.
• May–Aug 2024 (-3.9%). This followed the Apr 2024 gross peak (equity gross about 350%) and the Enhanced launch. Q3 2024 was "slightly negative for the first time in 17 quarters" [L3Q24 p.1; Data25].

What drove the big years.

• 2020. Gross attribution was +55%: energy-transition longs +43 points (SPACs from July, e.g. Star Peak; energy storage and EV themes), credit +12.5 points, and traditional-energy shorts +14.8 points [Data25; L4Q20].
• 2021. Gross was +39%: traditional-energy longs +32.5 points and energy-transition longs +21.2 points.
• In both years the energy-transition book ran a meaningful net long. It averaged +15% from 2018 to 2021, peaked at +51%, and reached +38% in Oct 2020, while ICLN rose 142% in 2020 [Data25 Exposure].
• Since 2022, average equity net has been +4% and energy-transition net +7%.

Read.

• Drawdowns look explainable, and the manager's own account (utilities and credit in March 2020) is specific and self-critical.
• Repeatability is the open question. Much of the since-inception compounding came in 2020–21 on $90–230M of AUM, with clean-energy directional exposure and IPO/SPAC participation in the unrestricted class. Neither condition clearly applies at about $1.75B today.
• The post-2022 record (11.7% net at about 5–6% volatility) is the more relevant base case, and it sits well below the deck's 18–22% target [Deck25 p.7]. 2025's 18.9% came largely from April–May (+12.2%), alongside a 47% ICLN year.
• The persistent drag from equity shorts (2024–25 single-name shorts about -15 and -12 points gross) suggests returns come mainly from long selection and short-side hedging cost. That needs attribution net of beta and factors to confirm.

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5. Strategy and Edge

Claim.

• Yaupon covers the whole energy value chain, about 376 companies and $10.5T market cap plus 142 tracked names [DDQ25 p.17]. Its claimed edge is spotting "shifts in cost curves created by disruptive change" and picking relative winners and losers within each subsector [DDQ25 p.17].
• It uses heavy data work: E&P permits and completions, pipeline scrapes, satellite data, interconnection queues and cargo tracking [DDQ25 p.29; Deck25].
• It flexes across the capital structure, into credit, commodities, SPACs and PIPEs, and positions itself as a capital provider to a capital-hungry sector. Its first co-investment was an Altus Midstream preferred in 2Q19 [L2Q19 p.2; DDQ25 pp.14, 17].
• Recent framing has turned explicitly tactical: "machine-gunning (induction)" over theses, an AI/power "Lassonde curve", and a possible credit cycle in 2026–27 [L4Q25 pp.4–6].

Evidence.

• Positive returns came in years when every sector benchmark fell (2023: XLE, XLU and ICLN all down; 2022: ICLN and SPY down).
• Subsector nets have been tight since 2022 (each sleeve within about ±7% at Nov 2025) [Web25 p.10]. That supports a selection-driven rather than beta-driven return.
• Barra factor attribution is now reported monthly [FS-Dec25 p.4].
• The sector mix rotates. Energy transition dominated 2020–21, was flat to negative in 2022–23, and drove about half of 2025 gross [Data25].

Still to diligence.

• Hit rate and long/short spread by subsector, after factor and beta adjustment.
• Whether 2020–21 alpha was thematic beta (clean-energy and SPAC mania) or selection.
• Why single-name shorts lose money even in years like 2022, when XLE rose and net was near zero.
• How the "machine gun" style squares with the DDQ's thesis-signpost process [DDQ25 p.18], and what turnover and commissions it generates. The DDQ warns turnover "may significantly exceed" peers' [DDQ25 p.22].
• How the edge holds as the opportunity set shifts toward AI/power names that generalists now crowd. The manager itself calls crowding "the single most" important risk consideration [Deck25].

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6. Portfolio, Risk and Capacity

Construction (Flagship).

• Gross has ranged from 160% to 430% (average 291%). By average share of gross, the book is 85% equities, 10% credit and 6% commodities.
• Net has averaged 7% [DDQ25 p.18]. On 30 Nov 2025: gross 297.6%, net (19.0%), credit 32% gross, commodities 39% gross [Web25 p.10]. Equity-only on 31 Dec 2025: 261% gross, (2.5%) net [FS-Dec25 p.2].
• The book holds about 142 core positions on average (70 long, 72 short). Average core size is 2.5% long and (2.1%) short, down from 7.2%/(5.3%) early on [DDQ25 p.19].
• Dec 2025 concentration: top-10 longs 36.1% and shorts (36.5%); largest single long 4.6% and short (4.8%) [FS-Dec25 p.3].
• Long market value has averaged 149% (range 89–223%). The "typical" maximum is 250% but can be exceeded at the manager's discretion [DDQ25 p.21]. Enhanced runs at about 1.5x, at 445% gross in Nov 2025 [Web25 p.10].

Risk controls.

• Formulaic position reviews are triggered by relative and absolute performance and by holding period. There are no stop-losses on equity or credit [DDQ25 pp.20–21].
• Portfolio drawdown rules: cut at least 10% of GMV near a -5% YTD loss, 20% near -10%, and 30% near -15% [DDQ25 p.21]. When these rules were adopted, and whether they bound in 2019–20, is not stated.
• Illiquid positions are capped at about 5% at entry [DDQ25 p.21].
• Liquidity on a 10%-of-ADV basis: about 93% of the book in 30 days or less, 0.7% beyond 30 days, plus credit [FS-Dec25 p.3].
• Financing: portfolio margin at three primes, with Hazeltree counterparty monitoring [DDQ25 p.24].

Capacity.

• AUM path: $55M at launch, about $485M at the mid-2022 soft-close decision, about $820M at end-2023, $1.14B firm-wide at end-2024, $1.76B on 1 Jan 2026 [Data25 AUM; L2Q22; L4Q23; FS-Dec25].
• The 2022 letter said pre-existing capacity rights could take Flagship to "$1+ billion" and that the firm wanted to manage at that level "for a period of time" [L2Q22 p.22]. Flagship is now about $1.14B, and Enhanced adds about $618M at 1.5x exposure.
• My estimate of combined gross market value: Nov 2025 gross applied to 1 Jan 2026 AUM gives roughly $3.4B (Flagship) plus $2.7B (Enhanced), about $6.1B. Trade allocation moved to pro rata "based on levered assets" [DDQ25 p.22 vs DDQ24].
• Ask what capacity the manager thinks the strategy has in gross dollars, particularly for mid-cap energy-transition and utility shorts.

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7. Key Counterparties and ODD Snapshot

Other disclosed facts:

• SEC-registered adviser (CRD 298556). The firm moved from a CFTC 4.13(a)(3) exemption [DDQ24] to registered CPO status (NFA 0515705) by Nov 2025 [DDQ25 p.6].
• Controls: dual wire authorization plus Administrator release, with the CFO required [DDQ25 p.25]. An expert-network policy has the CCO chaperoning most calls [DDQ25 p.29].
• No regulatory actions or litigation are mentioned in the reviewed DDQs. Confirm this directly and against Form ADV.

Flags (not findings):

• The CFO also serves as CCO.
• Pattyn holds a passive equity and options stake in a private electricity-procurement company, in which Lebowitz also invested [DDQ25 p.7]. That company sits in the fund's coverage sector.
• An earlier consulting arrangement on a co-investment with a third-party manager [DDQ25 p.14].

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8. Known / Unknown / Ask Next

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9. Diligence Questions

Incentive Alignment

1. How much capital do Pattyn, the other owners and employees have in Flagship and Enhanced, in dollars and as a share of AUM, and how has that changed since 2018?
2. What share of management and incentive fees goes to the Strategic Investor, does it step down or sunset, and does it hold any MFN that constrains future fee terms?
3. What was the all-in expense ratio in FY2023–25, and how much of it was research and data pass-through?
4. Did Enhanced (2/20 on 1.5x exposure) and the AUD classes come from investor demand or from a path to grow past the 2022 soft-close level?

Edge & Repeatability 5. How much of 2020–21 gross P&L came from SPACs and IPOs, and from net long energy-transition exposure, versus spread? What would the restricted (no new-issue) class have earned? 6. Why have equity shorts lost money in most years? Is the short book a hedge (factor or sector) or an alpha source, and what is its beta-adjusted return? 7. What does "machine-gunning" mean for holding periods and turnover, and how has it changed since 2022?

Performance & Drawdowns 8. In March 2020, what were gross, net and the largest positions on the worst days? Did the YTD-loss GMV rules exist then, and did they fire? 9. What happened in May–Aug 2024 (-3.9%), and was it related to scaling gross into the Enhanced launch? 10. Which environments do you consider worst for the current, sector-neutral book?

Team Stability 11. Why did Goldman, McGreavy and Brouhard leave? Did any take strategies or LPs with them? 12. Who besides Pattyn can size or cut risk? How is Mehta's 10%/15% delegated authority monitored? 13. Are equity or long-term incentives planned for the new MDs and the Director of Research?

Risk, Financing & Capacity 14. What capacity do you estimate in gross dollars, by sleeve, and what would trigger a hard close? 15. What are the financing terms (lock-ups, margin) at each prime, and how much excess margin is there at about 300% (and about 445%) gross? 16. How do you manage crowding in AI-power and utility names that generalists now hold?

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10. Reference Check Prep

• Current investors. How was March 2020 communicated, and how quickly? Have capacity rights been honored fairly? Did the Enhanced launch or AUD classes affect Flagship investors' exposure or allocation?
• Former investors. Why did you redeem? Did the four-quarter gate or the 5% audit holdback cause friction?
• Former employees (e.g. Goldman, McGreavy, Brouhard). Is the process Pattyn-only or debated? How are analysts paid? How are risk overrides and position reviews applied in practice?
• Service providers (Northern Trust, EY, Kroll, the primes). Any NAV errors or late deliverables? Any valuation disagreements on credit, PIPEs or Level 3 assets? Any margin events?

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11. Suggested Materials Request List

1. Audited financial statements for FY2022–24 (and FY2025 when issued), for the expense ratio and Level 3 share.
2. Form ADV Parts 1, 2A and 2B (current).
3. Restricted-class (no new issues) net returns since inception, and Enhanced vs 1.5x Flagship reconciliation.
4. Monthly gross and net exposure, VaR and stress-test history, with exposures at the 2019–20 and 2024 drawdown troughs.
5. Monthly long/short attribution by subsector with beta and factor adjustment (Barra history), and short-book hit rates.
6. Side-letter summary, and the Strategic Investor's economic terms (redacted if necessary).
7. GP and employee capital in each vehicle over time.
8. Turnover and commission data, with CSA and soft-dollar totals.
9. Capacity analysis and the reopen/close policy.
10. Reference list: current and former LPs, ex-employees, service providers.
11. Northern Trust SOC 1 report, and any regulatory exam correspondence.

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12. Sources Reviewed

All files are in Fund/Yaupon_Flagship/sources/.

• YCM - DDQ - Nov 2025.pdf (44 pp.); YCM - DDQ - Oct 2024.pdf (43 pp.)
• YFCI - CEM - Nov 2025.pdf and RL redline vs Dec 2024; YMFLP - LPA - Nov 2025.pdf (dated 17 Nov 2025) and RL; YFCI - Sub Doc - Nov 2025.pdf and RL (not material to this note)
• YCM Data 2025.11.xlsx and YCM Data 2025.03.xlsx (monthly returns, attribution, long/short, exposure, AUM); the two files were cross-checked and found identical through Mar 2025
• Yaupon Flagship fact sheets, Jan–Dec 2025 (Dec 2025 used for year-end figures); YCM 11-25.pdf (Nov 2025 tear sheet)
• Yaupon Funds Jan 2025.pdf (presentation); YCM Webinar 12-11-25 vf.pdf
• Quarterly investor letters 4Q18 through 4Q25 (29 letters). Read closely: 4Q18, 2Q19, 3Q19, 4Q19, 1Q20, 4Q20, 1Q21, 1Q22, 2Q22, 4Q22, 4Q23, 2Q24, 3Q24, 4Q24, 2Q25, 3Q25, 4Q25. The others were searched for team, capacity and AUM statements.

All return statistics, drawdowns, period splits, attribution sums and the gross-dollar estimate are my calculations from [Data25] and [FS-Dec25] unless a page is cited. Attribution figures are simple sums of monthly gross contributions, not compounded.