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New York, 11:59 PM
Thu Nov 26
15 posts in the last 24 hours
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09/29/09
Hedge funds are a joke, and their time will come, just like with mutual funds in the 80s and investment banking in the 90s and 2000s. In fact, they've already had their own mini crisis (LTCM). There will be more Amaranths, Madoff Investments and Stanford Financials, rest assured. Normally such collapses would be huge news if not for the huge banks that drew the headlines, like the $700 billion collapse of Lehman Brothers.
As LTCM proved, you cannot make sustained excess returns merely because you have decided you are going to start "hedging" things. You can short, long, straddle, strangle, strip, strap all you want--it will only temporarily mask the simple fact that hedge funds generate higher returns merely through the assumption of greater portfolio risk, which they have not had to disclose, being immune to regulation. As we all know now, undisclosed leverage is never a good thing.
09/29/09
09/29/09
It would help if we could see his positions, wouldn't it? But he said the market's irrational - explaining away poor performance with an argument like that makes you look like you don't know what you're doing. Of course the market's irrational, that's the whole point.
09/29/09
09/29/09
Seeing as he's probably the most well-known former "hedgie" in America (among the general public, at least), calling him the face of hedge funds is not a ridiculous statement.
09/29/09
Maybe from a public perspective - certainly not from the perspective of a market watcher or participant. Cramer made his bones as an entertainer, a circus performer on a circus network. He is neither representative of hedge funds generally nor the face of the industry - the two names I provided are better choices unless the intent was to express an outsider's view. Not the angle I'd take, but I'm willing to accept that I may be too close to the subject to be an effective commentator.
09/29/09
09/29/09
But really, this is the egregious part: no one considers Jim Cramer the face of hedge funds. George Soros is a recognizable-in-pop culture actual hedge fund guy.
Jim Cramer runs an entertaining show about personal investing and hasn't been a fund manager for years.
09/29/09
As we've documented, Thiel's redemptions/outflows have been heavy since the implosion last fall. Yes, some of his investors have probably needed liquidity, and fast. But that's not everyone. Some people clearly weren't in this for the long haul -- some people saw Clarium as a hedge fund, not like long term buy and hold until retirement Berkshire Hathaway shares.
And re Soros as a public name, we'll have to agree to disagree.
09/29/09
Not one sophisticated investor treats Hedges as an asset class, because their opinions are driven by brokers. Even bargain-basement brokers differentiate between a quant and an event-driven fund now. That idea of selling every fund as absolute return was on its way out before Madoff and it's long-gone - hedges have to seem "different" to scared investors. I'd say you should call an AI guy at a brokerage sometime, but you're a Valley blog and I'm kind of confused at your choice of angles here.
RE: Thiel's bleating, his investors don't buy his crap not because it isn't true - I actually agree with him - or because they need liquidity. They don't buy it because every single loser ever justifies their losses with a similar mantra. "The economy just doesn't understand its own flaws! Boo hoo! This is irrational!" Yeah, and you're insolvent, because investors chase performance.
09/29/09
Also, if you're not looking at a fund as an distinct investment strategy--which they always are, or there wouldn't be a hedge fund industry-- you're obviously NOT a sophisticated investor. People who don't bother to do that and just throw money at a fund because it has a brand are the unsophisticated investors--i.e, the poor suckers who gave money to Bernie Madoff.
I think people are abandoning Clarium because they're pessimistic about the portfolio and maybe Theil's competency as a manager, not about hedge funds in general.
09/29/09
09/29/09
The requirement to perform is not unique to hedge funds. People abandon everything from actively managed mutual funds and the abbreviated thing they picked with their 401(k) plan when performance turns. Humans are performance chasers by their nature. The latitude is never there, which just serves to point out how ridiculous/trite Thiel's argument is - the only reason people claim that they invested for the long term is because they lost a lot of money in the short term. If you can't generate alpha, go home, and the first thing a real investor learns is to never let philosophy get in the way of the trade.
09/29/09
2008 sucked. But for the outstanding performance of a few undervalued stocks, we would have been crippled like everyone else. As it was, it was a 20-year low in our performance.
But guess what? No complaints. Few withdrawals, albeit a few more than in prior years. Those who did leave cited "personal liquidity concerns" rather than our portfolio managers' performance.
No matter what Gordon Gekko says, greed is never good, and chasing performance is not investing in the classic sense. Real investors know their portfolio managers, read their confirms and statements, ask questions, and monitor their accounts. Dilletantes write checks and let the mail pile up while sucking down scotch and hoping for the best. (And when that doesn't pan out, they switch to cheaper scotch.)
Not busting your balls here - just disagreeing with your thesis.
09/29/09
09/29/09
Off to GMail I go!
09/29/09
I suppose that the point is that one can't put hedge fund managers and their investors in a convenient basket. Some are greedy, noveaux riche scum, and some are decent people. Some are all about performance, and some tell their advisors that all they care about is 2025.
Thiel may have great investors, but he should make sure that they understand the whole process.
09/04/09
Listed in the 14F from May 14th, is a $500 MM position in the OIH (an ETF which tracks oil service companies). So if the AUM is $1.5 B, Clarium had 33% of the fund positioned in the OIH, a position that they exited sometime between May 14th and Aug 14th.
The OIH traded from $89 - $114 between the two 14F filings. Since the OIH was on an upward trajectory up until May 14th (The price of the OIH was near it's low around then), it's a good bet that Clarium made money on the OIH position, and that their equity holdings outperformed the S&P over the last period.
How Clarium did in their debt and currency holdings (remember they're a global macro fund) is up for debate. But based on the OIH holding, it's likely they outperformed the S&P.
09/05/09
07/08/09
07/08/09
So all you see these finance folks doing -- all this scurrying to and fro -- is just people trying to be in the exact right place when luck happens to strike.
Yeah, finance is pretty existential when you look at it that way, isn't it?
07/08/09
07/08/09
At a mere 1% for management fees per year -- whether he makes a dime at all -- he is still bringing $150 million per year. That takes care of a lot of salaries and overhead.
Don't you worry your pretty little heads about Clarium or Thiel. They will be just fine.
07/08/09
Wow. Great math.
07/08/09
07/08/09
What's 10% of $1.5 billion? What's 1%?
07/08/09
07/09/09
06/09/09
05/18/09
05/18/09
05/17/09
05/17/09
05/16/09
Really.
05/16/09