I hate to say I told you so, but I told you so: Things are bad, and they may get worse before they get better. You don’t need to read this blog to learn that jobs are being lost, prices of everything from a carton of milk to a gallon of gas are through the roof and there is no end in sight for the conflict in Iraq and Afghanistan.
But my advice is the same as it’s always been. If you look back at some of these blog posts over the last year or so, as well as some of the material in our newsletter and my books, I’ve been saying for quite some time that they really need to understand how their money is being managed. Unfortunately, the questions, comments and confusion I’m seeing suggest that no one – or at least very few – are heeding this advice. That can only make a bad market look worse.
Well, let me tell you two things: First, if you are a hedge fund manager or budding hedge fund manager during markets like these, stay in touch with your investors and potential investors. Second, you investors out there — or potential investors – need to ask lots of questions, and make sure you get answers to all of them.
Recently, one of the many financial publications wrote that hedge funds are overrated, the managers are paid too much and that these investment vehicles for the rich should be outlawed. I tried to find that clipping for you, but then realized it was too difficult: All of them had written that story.
Such articles have littered the press of late, and I expect them to pile up even more in my dustbin. People are confused about what’s going on in the markets and when they are confused they make bad decisions – knowingly and unknowingly.
So take what you read with a grain of salt. As long as you have good reasons for handing over the money you’ve given to particular managers, you should have no problems with your portfolio in the long run. Short term bumps and bruises are to be expected. Long-term gains are what should be delivered. In either case, make sure you have conviction and if you don’t act accordingly.
As for the future of the hedge fund industry, my thoughts are simple: Those funds that have the wherewithal to weather this and other future storms will make it. Survival takes, time, patience, understanding, chutzpah and balls. A little of each will go a long way.Those who don’t have them wither and die. Don’t shed a tear, it’s Darwin’s world and we’re all just living in it.
On another note, before we know it, the summer will be over and that can mean only one thing – it is time for HedgeAnswers. To learn more about our exciting events go to www.hedgeanswers.com. Register today, seats are filling up fast!