I hate to say it — in fact I don’t think I’ve ever said it in the more than 20 years that I’ve been working in and writing about hedge funds — but we might be at the top. The bloom, as they say, might be off the rose. You see, it was reported earlier this week that a former governor/senator/failed CEO is about to or is considering or talking about launching a hedge fund. And many predict that this individual will have great success. Well folks, if this person, no names here, succeeds, it might be time to give the industry, and more important, its investors a good hard look. What is that P.T. Barnum said? Wait, maybe I’m wrong, maybe the industry isn’t at the top, it’s just who the investors who’ve lost their minds. Phew, that is a relief!
The process of raising money amazes me. Some of the best managers, those who have good strategies, who explain and illustrate what they’re doing with their portfolios, and who post good returns, often have an incredibly difficult time raising money, while those who come out of large investment banks simply pick up the phone and buckets of cash fall into their funds. Sure, there’s due diligence; sure, there’s research into the strategy; sure, all the i’s get dotted and all the t’s get crossed, but at the end of the day the old adage holds: “Nobody ever got fired for buying IBM.” Size and name recognition matter. Investors, regardless of sophistication, stick with the name brands and size. And that’s why a former governor, senator and failed CEO will probably be successful with his hedge fund launch.
Two words: Buyer beware.
The next HEDGEAnswers Launch Session Call is May 13 at 10 a.m. If you haven’t registered there’s still plenty of time. It’s the last call before our summer break. I hope you will join us. Register here.
THINGS THAT DRIVE ME CRAZY:
I am happy to report that the only thing driving me crazy this week is written above.