I highly suggest reading Jason Zweig’s “The Intelligent Investor” column in last Friday’s Wall Street Journal. It‘s a great piece about why investors need to be wary of hedge replication products and other types of investments that track or follow well-known investment managers. He astutely points out that there is more to investing then simply copying someone else’s ideas. Investing, you see, is about doing the research. It is about getting dirt under your fingernails and making decisions based on facts and figures, not simply filings. It turns out that most of these follow-on funds use regulatory filings to create their portfolios; that is, they put on positions based on news reports. And I can’t blame the men and women who “manage” these products – they’re just giving the people what they want, or maybe doing a bit of leading sheep to the slaughter. Products like this exist because there is a market demand; without any demand, there would be no replication products. It will be interesting to see how demand holds up as many of the replication products start putting up bad numbers.
Investing is about doing the work; it is not about following someone else’s lead. It isn’t easy. It is hard to dig in and find opportunities and create a portfolio of meaningful positions. If it was easy, everybody would be doing it. When it comes to investing, as I have said before, it is your money; you need to know what’s happening with it. Understanding how money is managed, whether in a mutual fund or a hedge fund, is important. Ask questions and demand answers. It’s your money and you have a right to know what’s happening to it. If you are told that the fund is replicating this icon of Wall Street or that icon of the investment world, I would give it a pass and find an alternative. You need managers who do original research. Period. End of story.
Operations for Alternatives is scheduled for February 1 and 2, 2016, at the Fontainebleau in Miami. Once again, OFA will be the single largest gathering of operations professionals from the investment management industry. If you have not yet registered, do so by clicking here.
THINGS THAT DRIVE ME CRAZY
I am sick and tired of people hiding behind e-mail. It seems that people have forgotten how to pick up the phone and make a call. Clearly they know how to pick up a phone and send a text – but when it comes to dialing, it seems everybody has forgotten how. I for one am not afraid to call people and, frankly, I enjoy it. When I want to connect with someone, I call them. I’m not afraid to push a few buttons, and you shouldn’t be either. E-mail is impersonal. A phone call allows you to engage. Engagement is a good thing on so many levels.
I wish you and yours a very Happy Thanksgiving.