Wednesday, May 22, 2013

HFM Advertising or How To Take The Management Out of Risk Management

I have advertising in my blood. One of my relatives invented the Coca-Cola's first brand extension. Yet another relation miraculously figured out how to convince housewives to buy boxes of ordinary baking soda and, quite literally, pour them down their drains and flush them down their shiny white toilets. Kerplooosssssshhh. He was paid handsomely for his efforts.   

Hedge Fund Management Companies, and their owners, must be salivating at the imminent opportunities advertising will afford their businesses (and please please please will dewey-eyed pseuds use the correct language:  'Hedge Funds' do NOT advertise; 'Hedge Fund Management Companies' are the not-so-altruistic interested parties here). 

Traditionally, Managers kept low profiles. They maintained anonymous sounding names, discreet offices, unpretentious business cards and few titles. They rarely gave interviews, to keep their secrets, well.....ummm errrr ....secret. But if you make a billion dollars in a single year, or, less discreetly, do it for several years in a row, it is, it must be said, rather hard to keep you (and your Gulfstream IV and your divorce) out of the limelight.

So as the business of Hedge Fund Management converges with Traditional Asset Management, Hedge Fund Managers must begin the arduous and fickle process of branding, identity, and positioning in what is arguably an increasingly-crowded space. Where does the successful manager start, without taking one's eye off the proverbial investment ball? Not being too mercenary here, I'd suggest you contact Cassandra, who has taken the liberty of conjuring (and be warned, copyrighting) some apt off-the-shelf tag-lines and slogans that capture the bona-fide essence of these truly unique entities that will shortly serve the other 99% of the investing public. (Please feel free to contribute your own in the Comments Section)   

 "When Everything Is Not Enough"

 "Have We Got The Trades For You!!"

Clive Capital 
"Working To Help You Try And Make it Back"

"Thank God For 'Dead Pet Trusts' "

Henderson (Absolute Return Fund) 
 "At Henderson, We're Redefining 'Absolute'"

Marshall Wace  
"The Closest [Legal] Thing to Getting The Call Before The First Call"

SAC Capital 
 "Systematically In Front" 

"Fighting For Return To The Bitter End" 

Bridgewater Associates 
 "We do it OUR way…(And it Works!!)

Campbell & Co 
"There are Leaders. And There are Followers. We are Followers."

Greenlight Capital 

Paulson Capital 
"All It Takes Is One Big Trade"
"A Piece of Your Own Private Lottery"

Eclectica Asset Mgmt
"It's The Thought That Counts"

Pershing Square 
"'The Squeaky Bird Gets The Worm"

DE Shaw 
"We're So Annoyingly Smart…So You Don't Have To Be"

Blue Sky Japan 
"We Take The Management Out of Risk-Management"

Citadel Investment
"No Comments. Just Returns."

"Hedging is for Sissies" 

RAB Capital
Helping Investors Make a Small Fortune (Out of a Large One)

Hayman Capital 
 "Strong Conviction Walks the Line Between Brilliance and Ignominy"

ESL Investments 
"Redefining Concentration"

Highfields Capital 
"The Keys To Better Returns"

Winton Capital 
 "Making Trends Your Friends"  

Elliot Associates 
"We Are Paid To Be Greedy, And We Do Not Disappoint" 

Kynikos Assoc 
"[A Bit] Smarter Than The Average Bear" 

Monday, May 13, 2013

League of Extraordinary Gentlemen

I get depressed from time-to-time thinking about "The Edge" SAC and other "well-informed" investors can (and seemingly often do) achieve in comparison to an uninformed, but nonetheless reasonably systematic investor, such myself. Certainly, some of this is derived from good security analysis, and old-fashioned vision. But "The Edge" historically appears to be disturbingly pervasive across a variety of analysis such as the penchant for the slightly weaker of the highest momo stocks (many of which were formerly the highest momo stocks), but which haven't (yet) been torpedoed by preannouncements or estimate revisions to underperform their close highest momo kin, and have a meaningfully elevated probability of being torpedoed in the next interval. While there may be other explanations for this phenomena, Occam's law would lead one in the direction of selective disclosure and trading upon material non-public information. Not that one should be surprised at this.  The sheer number of people with privileged information is vast as is the trade in such information via "expert networks", even before considering friends, family, old boys' networks or similar networks of obligation and

All this makes Porsche's Volkswagen ummm.... it a pecadillo, all the more incredible, and the losses suffered by the investment equivalent of "The League of Extraordinary Gentlemen" all the more schaudenfraudelicious. Larry Robbins prescient Glenview, David Einhorn's wily Greenlight, Halvorsen's mighty Viking, Singer's calculating Elliot Associates, Carlson's swaggering Black Diamond, as well as SAC, Tiger Asia, and Perry, and another more than forty, well-snookered, plaintiffs all got smoked. There were undoubtedly many more, who, like the guy who tried to open a bottle of Champagne with a corkscrew, were too embarrassed to put their name in the lights.    

Some think, and argue persuasively that Porsche is well-guilty of outright fraud. I am certainly not qualified to judge the legal merits, but as a detached observer, and one who tries hard NOT to be a
hypocrite, I am amused that the guys who persistently pursue, and often obtain,The Edge (by hook and/or by crook) are suing because they were, on this occasion, on the very wrong side of The Edge. Porsche managed to keep their intentions so private, NONE of The League had sufficient suspicions to prevent getting hammered. And impressively, there were no apparent leaks by Porsche's option counterparty banks, accountants, lawyers, or administrators. Or perhaps The League were just so overconfident in their fundamental assessments, they didn't feel that they needed to go the extra mile to obtain the requisite Edge.

So despite my opening lament, upon  reflection, I finish with a tad more optimism, knowing that The League are not infallible, and that they do, from time-to-time, get it horribly wrong. Maybe this should be Martoma's and SAC's defense ("what the hell! i was at RISK!! the Doc coulda been talking out his ass!!). But it also seems that in continuing to pursue the suit to the end that there is a fundamental asymmetry, a lack of sportsmanship in taking one's market lumps. One wonders if Martoma's expert network Doc WAS fabricating material non-public information...would he be sued?