The Hedge Fund Business Explained

[Cronopio]

http://www.huffingtonpost.com/henry-blodget/the-hedge-fund-business-e_b_141970.html

by Henry Blodgett

It's no secret that hedge fund managers are a super-smart lot. How do we know that? Because they went into the hedge fund business!

After all, what's the worst thing that can happen to a hedge fund manager? He can lose so much of his investors' money that they yell at him and take the rest back. Nothing ventured, nothing gained. ...

Well, he had five years in which he matched the S&P 500. And he also had the sixth year, in which he again matched the S&P 500... and lost just about every penny he "made" over the prior five years. So the hedge-fund manager's clients didn't do quite as well as he did over the period. Specifically, he made $261 million. They made, in aggregate, on a gross basis, $10 million.

Really?

No, of course not really. Because, every year, while the hedge fund manager was subtracting the fees that eventually added up to his $261 million, he was reducing the amount of capital the clients had in his fund. On a NET basis, therefore -- which is the only basis that matters -- the hedge fund manager's clients LOST $203 MILLION OVER THE SIX YEARS. That's an aggregate loss of 20%.

To summarize: Over the six years Capital Compensation Partners was in business, the firm made $261 million, and the firm's clients lost $203 million. All the risk, meanwhile, was borne by the clients, who got obliterated in the end.

See how smart hedge-fund managers are?

[Warpy]

1. Why do you think so many of them are headquartered

at mail drops in the Caymans? Why do you think Wolfowitz was selected to head the IMF at just the time the IMF was deciding whether or not to adopt international regulation of hedge funds?

And that's just the beginning, folks.

[cali]

2. um, most of them are headquartered in Greenwich CT

that's where it started and that's where the fuckers are. The New Yorker did an excellent piece about Greenwich and Hedge Funds a couple of months ago.

[Warpy]

5. In 2006, the last year I found figures

there were in excess of 9000 hedge funds headquartered in the Caymans, alone. There are more in Bermuda and on other islands with lax regulation of offshore corporations.

This is an international phenomenon. Just because hedge funds started in the US and some of them are still headquartered here doesn't mean they all are, or even that a majority of them are.

[WhiteTara]

8. Joe Lieberman and Chris Dodd's

back yard. Hmmm.

[leftofthedial]

3. why do you think the right wing staged a coup in 2000?

it wasn't to wear military costumes and codpieces.

We've been had. And good.

[Cronopio]

7. The hedge funds that the Carlyle Group was involved in imploded as well.

But I guess that's the way it always is with the rise of fascist regimes - just a few lucky few end up cashing out (and some of them lose it all in time) while most of the dumbasses that support the regime get thrown overboard.

It's a silver lining.

[leftofthedial]

9. make a few trillion, the few among the few bail with the goods

the whole thing goes in the toilet

the chumps among the few get flushed along with the shit

we never even get to play the game, although we usually have to pay to clean up the mess

[truedelphi]

4. Also, do not forget, until we "socialists" start spreading the wealth around

And tackle revising the tax code, hedge fund managers pay 15% on their millions (even though to me it seems more like money they have swindled - so perhaps we should be awful glad we get that 15 per cent - after all, if they were out robbing little old ladies at knife point rather than through their convoluted investment strategies, our Treasury wouldn't see even that 15 per cent.)

So become a teacher and pay 22 to 28%. Become a hedge fund manager, and salt your money away in the Caymans.

[formercia]

6. Robbing banks is chump change.

With that kind of loot, they can afford the best lawyers to keep them out of prison.

[Greyhound]

10. Just another day in the financial industry. K & R

[benld74]

11. THEY NEED TO BE OUTLAWED!