Posted on 09/01/2008 1:55:05 AM PDT by TigerLikesRooster
Atticus hit hard by credit crunch
By James Mackintosh in London
Published: August 31 2008 23:35 | Last updated: August 31 2008 23:35
Atticus Capital, one of New York’s most powerful hedge funds, has lost more than $5bn (€3.4bn) this year, as its record as one of the world’s top performing money managers was damaged by the credit crunch.
The firm’s two flagship funds fell by a quarter and almost a third by the end of August, marking among the biggest losses in dollar terms ever recorded by a hedge fund. This was as a result of its strategy of taking large, concentrated bets and using few “short” positions betting on a fall in prices to lower risk.
Atticus had $14bn under management at the end of July, according to letters to investors, down from a peak of more than $20bn last year.
(Excerpt) Read more at ft.com ...
Ping!
I'm in my 11th year working for 10 billion plus hedge funds, all of them top performers, and everyone I've ever known who got blown away when a bubble burst, and for that matter everyone I've ever known who thought it was a good idea to be "short-vol" was a liberal.
We had a macro guy at the last firm I worked for who was notoriously liberal. He even bet me $100 that Howard Dean would be the next president and gave me 3 to one odds. He blew up by selling out of the money S&P options 2 days before ex, and never paid me the $300 he owed me.
Bryan Hunter from Amaranth... he's a big lib as well. All the guys who considered themselves experts in the dot.com business... all libs...and all out of the business.
This conversation is probably wasted on many people here because they don't understand how hedge funds work on the inside. They think that if someone like George Zoros runs the firm then the whole firm will only make trades that support his political view. They think that hedge funds are free enough to manipulate assets or that most hedge funds are REALLY run by a secret Cabal composed of The Queen, Colonel Sanders and the Jews. Either that, or they believe that every SPV and holding company in the Cayman Islands is really a discreet hedge fund unto itself and there are 20 gazillion funds out there systematically looting the American taxpayer somehow. I'm frequently amazed at the level of nonsense presented here as fact.
But in my experience, the spread between the political leanings of PM's in hedge funds pretty closely matches the broader nation. And although I know it's a small sample, everyone I've ever known who blew up was a liberal, and everyone I've ever known who weathered the crises without pain was a conservative.
Tiger- Another group that you could throw in with the limousine liberals are the elitist knuckleheads who advocate imposing population growth limits on the third world. The notion is to protect the life-style of the developed world. College campuses are just full of these tenured folks.
A while back, I read a book by Peter Bernstein called “Against the Gods”. It dealt with risk and investing. There was one phrase he used in the book that always struck me as important for any investor to remember: “Eventually, everything regresses to the mean.” For those not up on Statistics, that implies that no one does well all the time. Over a long enough time horizon, everyone’s performance will approach the industry average. While it may not be universally true, it does mean that one shouldn’t expect higher than average results forever—eventually there will be a reckoning.
I'd guess it wasn't their political beliefs which did them in, but their attitudes towards low probability, highly leveraged bets. Going short out of the money options is one of those things that works for a modest payoff most of the time, but when it doesn't, game over. Could you say a bit more linking the way the invested with their world view, either on or off line?
Actually, it doesn’t mean “no one does well all the time” it means that no market goes up all the time. It’s a mistake to assume that the performance of someone’s portfolio is the same as the performance of a market. Yes ... it’s easier to make money in a market that’s going up because there is a risk premium available for being long. But there are lots of professionals who make money in flat or falling markets too.
I know dozens (if not hundreds) of people who have outperformed the market every year for their entire careers. Some of the more notable names have done that for 20 years or more. If all people were the same in terms of intelligence and insight, then their individual performance would be due to luck and it would eventually revert to the mean, but that obviously isn’t so.
Yeah... I didn’t mean that it was their politics that ended their careers but that their politics and their investing style had both been caused by the same flawed decision making process. It’s rooted in a belief that they are somehow special and that the rules that apply to others (like the laws of probability) don’t apply to them.
More to the point, I think it might say something about how liberals define “the truth”. According to the ideals of modern American liberals, everyone has their own truth and “objective truth” is defined only when it turns out that lots of people believe the same thing... when something becomes popular.
When these financial bubbles occur, the professionals ALWAYS no that things are being priced wrong, but those that think all truth is individual go for it anyway. In the meantime conservatives look at the data and say “this is wrong and can’t go on forever”. They may miss out on the 300% return years, but they also don’t blow up later.
Some of the more notable names have done that for 20 years or more.
They don’t run mutual funds... there isn’t enough money in it. Besides, the rules for mutual funds are so restrictive that it’s impossible to stand out. the fact is that apart from general differences is strategy, one mutual fund manager is pretty much like the next and the aforementioned comment about “everything regressing to the mean” really does apply.
Sorry.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.