It would be nice to see an update of the Inside the House of Money book after the crisis ends. It would be interesting to see those who made it and those who went broke betting on silly stuff like decoupling, financials have bottomed http://www.cnbc.com/id/15840232?video=841322377&play=1
ABK in two months 8 fold gain RDN .... PMI.... XLF jumped at least 25% from its bottom I doubled my money on buying WM at 3.13 and selling it at 6.05 just a couple days what are you talking about! lots of airline stocks doubled and tripled .... like CAL, UAUA, NWA....
I think this blow up has a LOT of implications for hedge fund investors. If one of the smartest, active, well-researched groups couldn't beat its benchmarket and blew up like that why on earth turn money over to other funds at all. A synthetic commoditity hedge fund 'Long XLE 25%, Long XLB 25%, Long rogers or goldman comm broad ETF 50%' should be that vast majority of other hedge funds, specially net of fees. Yet I can guarantee that Anderson will start a new fund and will get the money. his new fund will be at an all time high in assets under management just before the commodity boom ends
This has no implications for the hedge funds industry whatsoever. There's smart people blowing up all the time. 1998, summer 2002, spring 2004, summer/fall 2006, Aug 2007, summer 2008. This time is no different.
In hindsight, yes. What investment will beat the HFRX index (on a risk adjusted basis) over the next 1, 3, 5 years though?
as I understand you cant invest on that index. funds of funds will charge you 2/20 on top of 2/20s. you are left trying to find the funds who will outperform. I thought anderson was one of the smartest from IHM book, the guy worked with robertson, had blown up before with tech stocks, saw robertson shut down during the tech boom, you would think he would be conservative I even thought that if I was going to invest with somebody it would be him yet on a dollar basis the guy underpeforms that market by miles. yet you see more conservative guys like Rogers buying boring index funds and making a killing I agree that the hedge fund industry wont change I'm just saying it should, fees need to deflate
Hmm There are many good funds of hedge funds out there - no matter if the HFRX is investable, it is a good benchmark for FOHF performance. FOFs help you survive catastrophic losses in single hedge funds. If you invest in stocks you also don't just buy just 2 blue chips and pray either won't go bankrupt over the next 20 years. I doubt fees will come down in hedge funds simply because it's extremely expensive to run a fund - discretionary (expensive manpower) or quant (manpower, technology). Yes, the pay off is big if you manage billions but most funds do not. Also, there are few signs of hedge fund inflows ebbing off. We'll have have to see if the launching of 'intelligent' ETFs, commodity ETFs and short ETFs will change that over the long term. Regarding Rogers, unfortunately we have no idea if he is making a killing or not because he doesn't publish his performance. From the top of my head, he was allegedly long airline bonds, airline stocks (later in 2008), long JPY and CHF, short US brokers + FNM, long China and of course long his commodity indexes. If I go through his list of publicized investments, I see half of these bets were good as of right now in 2008, the other half weren't as good. Hard to say if he made a killing.
'Anderson has faced losses before. The Ospraie Fund fell 19 percent in the first five months of 2006 on losing bets in the metals market. That year the firm also closed its Point Fund, which had slumped 29 percent.' ``The fact that I had a horrible quarter is a statistical probability, and we had always told people there is that possibility,'' Anderson said in an interview last year. ``We do everything that we can to manage the risk, and I think we're better at it today than we were a year ago.'' that's always the risk with these funds. this guy worked with the very BEST, had faced quasi blow ups before, who can blame his investors, how the hell should they have seen this coming?anderson was supposed to be a short seller as well so he is no perma bull who buys any dip. I'm willing to bet a fund diversified commodities equities and commodities etfs will beat 95%+ of commodity hedge funds for the next ten years. even pickens got caught levered at the top and shorting at the wrong time even though he's probably right in the long run
IMO hedge funds are no different than brick and mortar companies. Blowups happen all the time, even to the very best. Bear Stearns survived 1929 and the Great Depression, only to blow up in 2008. You can dodge a thousand bullets, only to eventually miss the most obvious one. Do Enron, Worldcom and Bear Stearns mean all companies world-wide will go bankrupt overnight? Does it mean one can't make money over the long term investing in good solid companies? If the commodity runaway bullmarket continues, it will be very very hard for a long/short commodity equity/futures fund to beat a long only benchmark on an absolute return basis. That's usually the case in runaway bullmarkets. How many equity hedge funds beat the SP500 in 1999? Very few. Many got killed actually, being short, Robertson being the most famous example.
Trend reversals are good for seeing which hedge fund managers can actually hedge and manage their funds. This guy didn't blow up randomly. He blew up at *exactly* the same time as the overall commodity market had a huge correction. That is not market-neutral. That is massive market correlation. If he was running a truly hedged book, shouldn't his performance be independent of what happens to the energy or commodity sector?