Another Hedge Fund Goes Belly Up

February 12, 2008 | Leave a Comment

Its official.  Sailfish Capital Partners has gone belly up.  Expect more funds to follow in the next couple of months.  We don’t like to see hedge fund blow up, but this quote in the New York Times article by Mark S. Fishman, ”a pedigreed money manager who raised billions of dollars at the height of the hedge fund boom …” might say it all:

“It’s that sad dawning when you realize the market is so much bigger than you are,” he said.

Hubris?  You tell us.

Chelsea Clinton to Avenue Capital: Your Health Care Sucks

February 12, 2008 | Leave a Comment

As we all know Chelsea Clinton has been on the road recently to campaign for her mother, Hillary Clinton, in her bid to become the next President.  Some people call this “pimping” while I call it politics.  Whatever.

However, what IS astounding is Chelsea’s statement to MSNBC as reported by Politico …

“If you have health care and you’re not happy with it — like me who has employer provided health care, but I’m not happy with it — and if you are one of the 100 million who are uninsured at some point throughout the year… you’ll be able to buy into a Congressional health plan,” Chelsea Clinton said in a Milwaukee appearance broadcast, in part, on MSNBC today, in which she described her mother’s healthcare plan.

So, let me get this straight … Chelsea works for Avenue Capital, a hedge fund, a bastion of capitalism … and she finds it okay to espouse her mother’s socialist agenda and disrespect her employer.  Oh, the irony, the irony.  It makes me wonder what Avenue Capital’s healthcare plan is like?  How bad is it?

Note to hedge fund managers: don’t hire politicos as they will throw you under the bus in a heart beat.

Hedge Funds Take a Beating in January

February 6, 2008 | Leave a Comment

Chicago’s Hedge Fund Research released a statement saying that January was the worst month for hedge funds since 1998 — according to their data.  While reading some of the other blog postings about this “news” I was struck not by the postings themselves, but the comments to the posts.  A number of things became apparent … first that many people have no idea what hedge funds are or how they operate, and two, many people are under the impression that hedge funds are (by definition) hedged, so they can’t understand why so many hedge funds seem to suffer during periods like this.

Ah, if only all hedge funds were hedged!  The world would be a simple and straightforward place. But seriously, times like this are productive because the weak are culled from the herd.  I wouldn’t be surprised to hear of many hedge fund managers rebounding soon.

Here is the story as the Financial Times (FT.com) covered it:

Last month was the worst for hedge funds since the August 1998 crisis that presaged the collapse of Long Term Capital Management, according to data from Chicago-based Hedge Fund Research.

The average fund tracked by the HFRX index lost more than 2 per cent in January, with event-driven funds, which include activists, the worst hit with a 3.39 per cent loss.

Equity long-short funds – which also tend to be exposed to declines in stock markets – were badly hit too.

Funds that had long positions on stock markets lost out as UK blue-chips fell 6.6 per cent and the S&P 500 fell 6 per cent during the month.

For example, the computer-driven RIEF fund from Jim Simons’ Renaissance Technologies, one of the best-respected hedge funds, was down about 4 per cent, as it is structured to be long the market.

Simon Ruddock, founding partner of Albourne Partners, the London-based hedge fund investment advisers, said funds tended to do badly when markets changed direction but quickly made back losses.

Still, some performances are likely to be galling for investors, with many funds down more than 10 per cent.

How to Get YOUR Hedge Fund Listed in our Database

January 22, 2008 | Leave a Comment

We are still getting inquiries from hedge fund managers about HOW to get their funds listed in our Database.  Getting your fund into our database is so EASY.  In fact, it is so easy, some people cannot seem to believe it.  It really is EASY AS PIE.

All you have to do is click on the special link below, download the template, add your fund data and email back to us. It is that simple!  There are NO cumbersome online forms to fill out!

Step 1:

Click here to download the database template

Step 2:

Add your fund data to the downloaded template.  The template is an Microsoft EXCEL spreadsheet — something everyone is familiar with in the hedge fund industry.

Step 3:

EMAIL the template BACK to Hedge Fund Launch using this email address (spelled out to prevent spamming) … database AT hedgefundlaunch.com.  Remember, if you don’t send it back to us, we don’t have your fund data — so please send the completed template back to us.

You are DONE!  I know it might sound too good to be true, but it really is that easy!

The Grim Reaper Charges 2 and 20

September 24, 2007 | 1 Comment

Cliché alert!  The only certain things in life are death and taxes.  I have to disagree to some extent with the taxes part until we get a verdict on how my carried interest is getting taxed.  The death part on the other hand seems more certain these days within the hedge fund ranks.  Without naming names, it seems the mortality rate amongst hedge fund managers has been on the rise lately.  Possibly correlated with the fact that there are simply more hedge fund managers, but also certainly due to other factors. 

Now in a couple of high profile cases, death was the result of participation in recreational activities (e.g., snowmobiling, motorcycle riding, etc.).  In these instances, it’s hard to fault the deceased for having fun and living life to its fullest. 

Heart attacks, on the other hand, should make us step back and wonder if maybe our managers are too serious, too stressed, and not taking the best care of themselves.  Now don’t get me wrong, I want my managers focused, but I also want them to live long, happy, and healthy lives.  Please folks, make time for friends, family, exercise, and recreation and eat a more healthy diet.

Since we’re on the topic of death, let’s talk mortality trades.  That’s right, long and short mortality.  How is this accomplished?  Life insurance related investment strategies.  There are a number of ways to play this trade. 

Long mortality (i.e., your return is greater the shorter the life span of the insured): here investors can buy another person’s life insurance policy in the open market, pay the premiums, and collect the benefit when the insured dies.  The policy will generally trade on a discounted basis with the primary factor being the expected life of the insured.  With that said, the shorter the life span, the quicker the pay off and the greater the return. 

Another related long mortality strategy is to make a loan to an insured at a high rate (often 10%+ per annum) with the loan collateralized by the life insurance policy.  Here you have a couple of paths: 1) the borrower makes their payments and you receive the interest; 2) The borrower defaults, you now own the policy and sell it in the open market, hopefully at a premium to the outstanding loan value; or 3) the borrower defaults, you now own the policy, and you hold the policy (and pay the premiums) awaiting the insured’s death for your payoff.

Short mortality trades, on the other hand, bet on the life extension of the insured or group of insured’s.  A typical strategy here is selling extreme mortality protection.  This strategy is basically re-insurance or taking some of the risk off of the books of the life insurers.  Here, you are collecting a nice annual premium from the insurers (generally 10 %+), but are at risk if mortality in a certain pool exceeds set parameters.  A large amount of deaths from natural disasters or disease outbreaks are really your risk here.  These trades are generally private and bespoke allowing the investor to structure the pool of insured’s’ and the triggers. 

A much more feel good strategy as you’re cheering for life, right?

Seems like some pretty sick and twisted shit, eh?  Well, it’s out there and it’s a multi billion dollar segment of the investment universe where a lot of reputable hedge funds are playing and the insured are willingly selling their policies or borrowing against them (this is a far cry from the sleazy viatical game that occurred years ago).  Most related strategies are on the lower end of the liquidity spectrum, but the non-correlated nature of the trade, along with healthy (pardon the pun) returns, makes the opportunity set attractive.
blog posts

Hedge Fund Manager Circles the Drain

September 21, 2007 | 8 Comments

Although the New York Post refers to Timothy (”Timmay”) Sykes as a “hedge king,” I would hardly describe him that way.  In fact, aside from the humous value to this episode (which I am about to describe) there is an object lesson here - but let me set the stage first.

Timothy Sykes is a “self styled” hedge fund manager who supposedly took $12.5K of his Bar Mitzvah money and turned it into $1.5 million or so.  Ok, not bad for a guy who supposedly hangs out in his apartment all day in his boxers and bathrobe (some claim: pink).  I guess this is the dream of many day traders and, so it seems, some hedge fund managers. 

As the Post points out …

In 2006, Sykes was not only the star of the “30 Under 30″ bash, he was written up in the Times for turning $12,415 of Bar Mitzvah gift money into a $1.65 million fortune and launching Cilantro Fund Management, which became top-ranked by Barclays.

 Ok.  Great.  The fuss is about how Sykes was “disinvited” to Trader Monthly’s annual party.  Here’s the synopsis from DealBreaker …

The row over “Trader Monthly” disinviting Tim Sykes to this year’s “30 Under 30” party is so fantastically petty and stupid we can hardly keep our legs crossed. Basically, the week before Tuesday’s awesome soiree at Gold St.—and make no mistake, it was awesome, if you’re into the B&T crowd—a VP from the magazine emailed Tim to say that while he could not bring a camera crew from MSN with him (which had previously been tentatively approved), he was still welcome, on his own. This was last Friday. On Monday, young Sykes received a second email, informing him that actually, he couldn’t come, either.

Now, to put this all into perspective, it seems the Cilantro hedge fund hasn’t been doing so well.  I don’t profess to know anything about this fund or its returns, but I do know how to spot when a manager loses focus.  I also know when to spot what I would call immaturity and ‘optics risk’- a term coined by institutional investors to describe the public profile of a manager.  If you are high risk - they don’t want anything to do with you.  At this point, I think “Timmay” has cut his own throat with the institutional crowd.   

But Cilantro has suffered major losses, and in his new book, “An American Hedge Fund,” Sykes slams the market, writing: “I would like to thank the thousands of inept corporate management teams, shady brokers, boiler rooms, stock promoters, market manipulators . . . for your endless scheming and undying greed without which my fortune would never have been possible.”

Lane told us Sykes no longer fits in with Trader Monthly’s audience: “This guy has decided to become Mr. Media as his hedge fund loses money.” But Sykes said Lane and his magazine are losing face. “For the editor-in-chief of a magazine I used to worship, this is crazy,” he said. “It’s a slap in the face.”

Writing books instead of focusing on your performance?  Blaming others?  Come on.  Seems like Sykes is on the downward slide to Palookaville fast.

The lesson here is simple: focus, focus, focus.  Don’t mess around with book writing until you are well established and be careful in dealing with the press.  Consult a qualified PR person.

And if you need a friend, get a dog.
blog posts

The Sugarman Saga: Part Deux

September 18, 2007 | 3 Comments

Stuart Sugarman, alleged hedge fund manager and investment banker with Sunrise Financial Group, is now out of the Lenox Hill hospital — and he’s not happy (despite his photo where he is brandishing flowers).  His alleged assailant, Christopher Carter, a broker with Maxim Investment Group has only been charged with a misdemeanor.

Fuming, Sugarman is quoted as saying: ”This wasn’t just a playground fall where Stewy fell down and went boo hoo … The reality is I spent two weeks in Lenox Hill [Hospital], including a week in ICU and six hours in surgery ….”

Now, while Sugarman admits …

that he noisily war-whooped, groaned and shouted, “You go, girl!” during his last spin workout Aug. 15 at an Equinox gym on East 85th Street. That, he says, didn’t give broker Christopher Carter, who was three bikes over, the right to repeatedly yell, “Shut the f- - - up!” and then leap off his Schwinn and come charging at him.

Stewy goes on to explain

 [that he] is accusing the allegedly berserk broker - both men top 200 pounds - of tilting Sugarman’s stationary bike’s front wheel up a yard off the floor and flipping the bike and Sugarman into a wall.

Sugarman suffered a concussion from the bike’s falling on top of him, along with damage to six discs in the vertebrae of his neck. His surgeon, he said, tells him he was “one click away from a wheelchair.”

While prosecutors

… declined to comment on the case. Carter’s lawyer, Michael Farkas, said only that his client “did not commit any criminal acts.”

“Mr. Sugarman is clearly taking advantage of the criminal-justice system to build some civil lawsuit,” he said. Sugarman has yet to file a suit.

Earlier: Psycho Pile-Drives Investment Banker

NY Post: Gym Victim is Wheely Angry

Deal Breaker: ‘Stuart Sugarman is Not Happy’ — Stuart Sugarman

blog posts

Hedge Funds + Social Media … a Seismic Shift

September 18, 2007 | Leave a Comment

I reported back after my attendance at Gnomedex in August that the social media phenomenon is already changing the way people do business. This announcement reported by Reuters today is evidence that it is, in fact, happening: 

Facebook and Accel (their primary VC firm) announced that they will launch a new fund, investing in companies that build applications on the Facebook technology. It seems that Facebook is moving beyond being simply a social networking site and morphing into a platform for developers — and they are putting their money where their mouth is.

Also, check out the September issue of Fast Company.  Robert Scoble discusses in his column why social media sites like Twitter are going to change business.

The question is whether the hedge fund industry is aware of this and ready for it?  In my opinion, established funds will be more apprehensive to embrace this new movement than thier start up counterparts — to their detriment.  Start up funds run by younger, savvy managers will know about this technology and use it to their advantage and gaining an edge.  Let’s list the ways:

– Raising capital:  This is a no brainer and anyone with any familiarity with Facebook can see the potential.  It may already be happening.  After Gnomedex, I understood the power of social media and how it can empower start up hedge fund managers to raise capital faster and more effectively by networking and getting the word out about their funds and expertise.

– Finding talent: fund managers will be able to find talented people with the necessary skills and motivation to work for them.  The days of the resume, as we know it, are numbered.

– Managing the business: hedge fund managers who embrace social media tools will be able to manage their funds better and from practically anywhere (remotely).  They will also be able to interact with administrators, prime brokers, investors more effectively.  The brighest of the bunch will be able to take this, combine it with the 4 Hour Work Week and apply it to their business.
blog posts

Mutual Fund Manager Calls Hedge Fund Investors Stupid

September 12, 2007 | Leave a Comment

Percy Walker does a fine job of responding to the ridiculous assertions made by Arne Alsin a mutual fund manager.  Alsin asserts in a Financial Times article that hedge fund investors are are idiots.   (No, that’s not Percy in the picture, he is a much more handsome chap)

 As Percy states …

Anyone with a bad word for hedge funds these days can have it published no matter how little they know of the subject.  The latest bad word comes from Arne Alsin, a mutual fund manager who seems to know nothing whatsoever about the the behavior of hedge fund investors.

Working with many start up and emerging hedge fund managers, we get our fair share of business plans and marketing documents from them asking us for advice, comments, help, whatnot.  Now, in our experience, some of the worst business plans come from these guys.  This is not because they are stupid, ill informed or unprepared (or is it?).  Rather, the reason lies in the difference in mental discipline required to run a successful hedge fund versus a mutual fund.   For example, how does one go from a long only discipline to a long/short one?

In our experience, the transition is not an easy one — and often not made successfully. 
blog posts

Houston Hedge Fund Conference: Sept. 28

September 7, 2007 | Leave a Comment

I will be attending, naturally, as a proud member of the Texas Hedge Fund Association.  Hopefully, you will too.

On Friday, September 28, 2007, Rice University and the THFA are sponsoring the 2007 Houston Hedge Fund Conference to be held from 11:00 AM to 4:00 PM at the Jesse H. Jones Graduate School of Management at Rice University, McNair Hall. The conference will be free of charge to all THFA members. Registration can be done electronically at www.HoustonHedgeFund.com. The deadline for registration is Friday, September 14.

This second annual Houston Hedge Fund Conference (HHFC) will feature four keynote speakers from four different styles of hedge funds.

Speakers and Topics include:

ACI— Multi-Factor Quant Equity

Advent— Convertible Arbitrage

Highland Capital— Distressed Investing

Porter Orlin— Long/Short Equity

Last year, over 200 people attended this well run, informative event.  See you there!
blog posts

Comments