“Innocent until proved guilty”: I’m sure that I’ve read that somewhere. And while this is the law of the land, many believe it is the other way ’round. The minute someone is charged with a crime or even merely accused of an illegal act, the press, the public and the people jump to conclusions, often devastating those accused. Rarely, if ever, do accusers apologize when they’re proved wrong. Think back to that great scene in Godfather II when Tom demands an apology from the Senate Committee investigating organized crime.
Earlier this week, the Securities and Exchange Commission sued Leon Cooperman and his firm, Omega Advisors, accusing both of insider trading. Read the story here. And while the jury is still out (actually the jury has not even been brought in yet), the press is quick to damn the hedge fund industry for Mr. Cooperman’s and his firm’s alleged actions. The press has decided that this action brought by the SEC is the end of the hedge fund industry as we know it. According to one venerable salmon-colored newspaper, poor performance, high fees and scandal are rocking the industry to its core.
This, to me, is a bunch of malarkey. Yes, it is true that things have not been great for hedge funds in 2016, but one bad year, like one bad apple, does not spoil the lot. I mean, look at BP: It has pleaded guilty for its part in the biggest oil spill in history, which killed people and destroyed beaches and wildlife as it sent more than 4.9 million barrels of oil into the Gulf of Mexico. For a time, all was lost, BP was doomed and now a major motion picture staring Mark Wahlberg is being released — and the company is doing just fine, having pled guilty to, among other things, manslaughter and lying to Congress, and paid more than $4.5 billion in fines.
The hedge fund industry, dear friends, will weather this storm. There will be a shake-out. Managers will close because of poor performance and their inability to raise assets, but mark my words: The hedge fund industry is here to stay. The industry is strong, vibrant and a powerful force that the world needs to insure stability in the markets. The game is far from over. Don’t be fooled by the popular press.
Operations for Alternatives’ Hedge Fund Compliance rolls into New York on October 6-7. This unique program puts the right people together to discuss compliance issues facing managers. The speakers are a true who’s who of the industry and if you are in town you don’t want to miss it. To learn more and register, click here
Things that drive me crazy
Hard to believe, but nothing this week. Stay tuned; this will change.