Another Hedge Fund Bites the Dust

July 13, 2008

We talked about this subject a few times - guys in hedge funds taking huge risks; and as long as they are successful for a few years they generate what I term generational wealth (the type of wealth that lasts for your grandkid’s grandkids). Then they blow up. [Mar 28: Founder of Long Term Capital Failing Again]. They say it’s a once in a 500 year event; a black swan. Somehow these black swans happen every 4-6 years, where hordes of hedgies blow up because they don’t manage risk - but don’t worry about small details like that.

Investors get pennies on the dollar (or in this case $0). They could not even sell if they wanted to because they are "frozen" as the hedge fund manager deems must happen (see below for an example) A few years later they are given money to manage again… because they are just that smart. As if anyone who does not take crazy leveraged risks could not print money for 2-3 years. It’s an amazing situation; I assume others who actually manage risk deserve a chance too… but I guess I live in a fantasy world. On to the latest story…

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