A New Year, A New Post

The hiatus is over. I am back to writing the blog. It is hard to believe that Y2K was twenty years ago. As we move forward into the second decade of the new millennium there are a lot of bright spots on the horizon. The economy continues to be strong; people are working, and the markets are moving up nicely. And while there is quite a bit of political turmoil both here and abroad, which I am sure will pass as the year ticks on – there is still quite a bit to be thankful for this year.

That being said, things do not look so good for the hedge fund industry. Those of you loyal readers of the blog – with apologies for not posting in quite some time – know that I am one of the biggest defenders and proponents of the proliferation of the global hedge fund industry. Rest assured, I still feel this way but believe that the industry is at a true inflection point. I have seen some very distributing things over the last six months that makes me wonder if the world really needs so many funds run by so many managers that seem to offer so little value to investors. The issue at hand is that managers are supposed to zig when the markets zag and therefore generate alpha regardless of how the markets are moving. Lately, that has not been the case, many managers do not know how to short, they do not know how to hedge and more importantly, do not know how to generate alpha and as such have become closet indexers. This is not a new phenomenon but rather something that is being brought to light as global equity markets continue to deliver strong returns and yields remain low. Paying one and twenty or two and twenty for indexing is outrageous.

Investors really need to focus on alpha generation when doing due diligence. They need to ask the tough questions and demand answers that provide insight into how the assets are being managed and how managers are going to generate alpha. Complete, competent and accurate due diligence is more important than ever as the barrier to enter the hedge fund industry is so low. Proper and thorough due diligence will weed these bad apples out of the bunch. The IMDDA, of which I am a founder partner, is doing some great work in due diligence best practices – to learn more go to  www.imdda.org

Things that drive me crazy

Royal Caribbean customer service is horrible. My suggestion is to fire the entire staff and start from scratch. However, as they say, fish rots from the head, therefore management is more to blame than the operators who man the cruise companies’  customer service phone lines. The reps are rude, they are not truthful and arrogant. Simply put the company does not care about customer service and my advice is if you are planning on taking a cruise look elsewhere – there are other fish in the sea.