Used to be (way back when – say, 2007) if you had an MBA and a dream you could start a hedge fund, make a zillion dollars and overpay for a trophy wife and a Greenwich mansion to put her in. It’s harder now.
Tag Archives: Hedge funds
Or so said the jumper as he passed the 35th floor of the Empire State Building on his way down. Hedge funds are already reporting this year’s performance and, with just a couple of exceptions, they’re all up. Tyler Durden, who compiled this report, notes that the only way the funds could be up in such a down period is if they’re busy selling short. As Phillip Blumberg, Dean of my Law School and my corporation law professor used to caution, “gentlemen, the number one cause of suicide on Wall Street is selling short.” Look out below.
Her prediction – financial services will return to the dull old boring days when the good ones traded at 1 to 1.5 X earnings book value. No more leveraging 30X, no more out-sized salaries and, by the way,higher interest rates. My manager tells me that our office saw a large number of house viewing appointments today so maybe buyers are ahead of those pundits who think mortgage rates are going to fall lower and stay lower.
But sellers might want to consider what will happen if the financial services jobs and multi-million dollar bonuses disappear, especially if accompanied by higher mortgage costs. Nothing good.
And hedge funds? They’re not doing so well either. These guys charged 20% of the profits they earned: no profits, no 20% and no 20% until they earn back their losses, if they ever do. Citadel’s Kenneth Griffin, whose fund lost 55% this year, says he’s trying to stay open. “But he acknowledges that for several years, he will be working mostly for ‘psychic income.’ ”
Griffin will survive, but a lot of junior hedge funders will not be buying $4 million homes in Greenwich in the near future. Looks like the only ones who will will be Greenwich town employees.
Smart Greenwich kids with Harvard degrees? Astrophysicist? Let’s start a hedge fund! I think the train already left on that idea but I’m confident that we’ll eventually see a new wave of smart kids who find a new way to generate wealth. They always do, God bless them.
Uma Thurman and Arpad Busson lose big with Madoff. Or something – the link is really to a Bloomberg story on “Arki” Busson and his bad year. I like this part:
“Catching a fraud is practically impossible,” Busson says. “There’s only so much due diligence you can do. This was not an obscure little manager in the boondocks. He seemed like a very experienced, knowledgeable, trustworthy man — like the best con artists always are.”
Busson says there’s still a role for funds of funds like his, because institutional investors find the screening and monitoring of hedge funds too time-consuming and expensive to do themselves.
Go ahead and try to square those two assertions – I can’t.
Prediction: 1/3 of hedge funds to disappear. I have a client whose fund is up over 10% for the year but they’ve still suffered a withdrawal of 20% of their assets they manage, due to fear and customers who need money to pay other liabilities. If that’s what’s happening at a profitable fund, I won’t be surprised if this prediction proves accurate.