The companies were usually questionable or else in desperate need of hedge fund after a few months would then mark up the private placement to the current market price even though it couldn’t sell the shares. Another game at that time was for a fund to purchase private placements of publicly owned companies at substantial discounts with a so-called investment letter attached. In the years that followed in the hedge-fund world, the minuet of acolytes leaving the beloved master would repeat itself over and over great hedge-fund managers, the sun gods who have masterfully run huge money, like George Soros, Louis Bacon, and Julian Robertson, have all been generous in giving their talented people substantial pieces of the action.

Later, I figured out that he really cared only about whether the people who worked for him could make him money, and his interest in my pedigree was only because he thought it would make his firm seem more credible to his rich, socialite investors. GLOOM AND DEPRESSION BACK HOME May 6, 2003: I am back in raw, rainy, bleak New York, its blacktop shimmering under a low ceiling of gunmetal gray continue to see a lot of potential investors, but the mood of our prospects seems also are are like manic-depressives and go through violent mood swings from ebullience to despondency about our opening little capital seems to be actually signed, sealed, and delivered, perhaps $100 million, apart from my family’s money. He told me, ‘Leave for work early and get home late.’” The Swiss apparently didn’t think it was funny, because nobody laughed but me. I had the definite sense at the lunch that the crowd was curious to hear our pitch and was interested in our view of markets, but was unlikely to invest on the first go. We had additional meetings that afternoon, at dinner, and then the next day.There are relatively few hedge funds in Geneva, but there are a large number of funds of funds, which are run by the private banks.

The same applies to not squandering time on pleasantries with salespeople.Their job is to chat you job is to ingest information and make good hedge-fund guy I just mentioned is the toughest, fastest conversation terminator I’ve ever he thinks he has extracted the meat from a conversation, he just says,Thanks,” and that’s it. Hedge fund investing is so demanding, and strong investment performance is so exhilarating that many of the best investors fall victim to fatal attacks of hubris, burn out, or get distracted. Bernstein, the New York research firm, did a study of the likelihood of a company maintaining growth status years into the frightening results are in Table 6.1. Over the past half century, your odds of identifying a growth stock you can hold for 20 years are 4% and only 15% for 10 years.

His investment management firm, Fayez Sarofim & Company, has had a superb record, and Fayez is a truly great investor. I told them how, when I ran a hedge fund, Fairfield Partners, in the late 1960s, we sold short the retailers and the chemicals, both of which at the time sold at 30 times earnings when the market was at 17 times. I had been warned that numerous people wondered about my motives, so I began with a straightforward summary of why I was leaving the firm to do a hedge fund.

The funds of funds hustled the foundations and wealthy individuals, and the hedgehogs hustled it was over, I had no idea whether we had raised any money. As it turned out, that year, 2003, was a big up year in equity markets, and hedge funds in general did less well than the long-only managers who stayed fully invested. Although this performance in general was far better than that of long-only managers who, in 2002, were off at least 20% to 25% (minus 40% or more for tech guys), it was disappointing for those investors who believed their funds could actually make big money in both bull and bear mood of the crowd at that first Breakers conference I went to was sullen but not mutinous—yet.

Although there were some hedge funds (and not just shortbiased funds) that posted 20%+ gains in those tough bear market years, there were also a lot of big funds that were down 5% to 20%. Anyway?” As for the great mass of small, fringe funds of funds, there are too many dilettantes, too many laid-off investment bankers, too many former institutional salespeople, too many loser brothers-in-law setting up shop. On the other hand, even the larger pension funds are reluctant to venture into a broad exposure to hedge funds without a layer of insulation, so big, new money will keep pouring into the analytical professionals who know the hedge-fund world.

However, if as a buyer of hedge funds you could achieve the performance of the seventy-fifth percentile hedge fund, you would have earned 12.7% a year whereas the seventy-fifth percentile FOF did only 9.2%. By contrast, the twenty-fifth percentile hedge funds returned 3.2%, while the twenty-fifth percentile fund of funds earned 3.9%. In summary, the funds of funds are effective diversifiers.Trying to. The funds of funds charge a management fee of between 100 and 150 basis points, and most add a percentage of the profits levy of between 5% and 10%. The funds of funds also claim they have developed programs that combine sociological and statistical data to give early warning signals so they can time switches from one manager to another.There is no question that hedge-fund managers can run out of emotional are prone to performance bursts when they are hot, often followed by cold spells, but these swings are not easy to time.

I’m going into the hedge funds of funds business,” he said, brightening. Before tonight, I had last seen him in late 1999 when he ran a tech fund for a big, very aggressive mutual fund company in Denver.Those were the days when the new-issue market was on fire, and the Trigger was giving spellbinding speeches around the country about tech, Internet productivity, and a new public was pouring money into his fund, and the Trigger was riding high on the hog.