when kmrt came publc out of bankruptcy everybody could have bought and made 7X on their money and more on margin. you didn't have to be insider or connected to do well.
http://www.institutionalinvestor.com/default.asp?page=1&SID=513177&ISS=14977&type=10 all I can say is, "wow!" (oh yeah, when is my name gonna be on that list? ) quote: The nutty part is that a lot of these hedge fund managers didn't even do well. Take George Soros, ranked No. 6 with income of $305 million. The return on his Quantum Endowment Fund was just 4.6% net of expenses, about half the return on the S&P 500, which was 9% in 2004. Several others in the top 25 sported returns in the single digits. The top earner among hedge fund managers was Edward Lampert, who reportedly made $1.02 billion, the most in the magazine survey's four-year history. He became known as the man who engineered the merger between Kmart and Sears--now known as Sears Holdings (nasdaq: SHLD - news - people ) and chaired by Lampert--helping his ESL Investments earn 69% before fees. sKaLpZ
Nice article. Their main goal is returns with a minimized risk profile that fits nicely in the bell curve of the hedge fund universe. Speculation is far more interesting without those constraints.
You brought up a good point, that of "professional" or industry standard "constraints." Personally I can do more in the forex due to trading my own funds than I probably could trading money for a bunch of scared, whining, overly-conservative, neurotic, bitchy, prone-to-panic "investors." Like, when I lay my own money on the line I know my limits and how I want to manage risks/positions, etc. My tactics would probably make these hedge-fund guys faint. Consequently, that may be part of the reason why they only return dismal single digits. quote: The returns for hedge funds are probably worse than is generally stated. That's because the reporting of results is voluntary. Many funds blow up and go out of business; others choose not to report in bad years. Still others liquidate once they get into a hole, for fear that they will never be able to earn the large success fees. The promoters often simply start a new fund (see "The $500 Billion Hedge Fund Folly"). There is every incentive, especially for up-and-coming promoters, to make risky bets in order to establish a track record. If it works, great; if not, start a new fund. It's heads-I-win-tails-you-lose. And the winners win big.
"The nutty part is that a lot of these hedge fund managers didn't even do well." this is no different than officers of corporate america making outrageous sums on their options where the exercise price is revised downwards when the stock price goes down.
The Circle T Fund released the following letter to its investors "At 12:30 P.M., on June 1, 2005, we determined that the firm was the victim of unauthorized trading activity. We further determined that the misconduct was attributable to one trader. Immediately upon identifying the open trades in question, we took appropriate action to close out those unauthorized trades. The individual in question has been terminated and his trading authority cancelled. We have notified the SEC of this matter. We believe we have quantified the amount of the losses attributable to those unauthorized trades as less than 10% of the assets of the funds for which this individual traded... The firm's liquidity remains unimpaired and we continue to conduct business as usual."