Hedge Funds Are F#$%ed

Quite the headline. But it is true and no one is talking about it. Why are they f#$%ed? Simply because many cannot cheat any more. That may be harsh but it is true.  Now they must pick stocks without the insider’s edge.

The insider’s edge consisted of expert networks, other hedge funds “experts” and corporate insiders that invested in their funds. The biggest funds have been lined with the Fortune 1500 executives. No more thanks to the shut down of Pequot several years ago.

Hedge fund returns suck this year. Just go to www.hedgeindex.com and look at the returns through the end of October. Dedicated Short Bias -13.56%. Long/Short 1.88%. Event Driven 3.60%. Equity Market Neutral 4.43%. S&P 500  14.96%.

Time and again in the last 26 years I have heard, “well we do not need the technicals or a quantitative model because our network is what is our advantage”. Not anymore.

The Galleon insider trading scandal has every hedge fund in fear, especially now. Why? Because until now most of the convictions for insider trading were due to the perps being on tape. The Level Global/Diamondback Capital verdict out last night took the fear factor to a new high. Both those firms are toast as Diamondback last week joined Level Global in the category of hedge fund being shut down.

Why? Now the hedgies are being convicted without being on tape. Simply the jury believes they are guilty. The convictions will continue for the next several years as the Feds have so much material it is like shooting fish in a barrel for them.

Personally, I like this. Why? Because now hedge funds need to more intuitive and use quantitative tools like the ones I work with to make decisions. A great example of this process was yesterday’s recommendation of Chipolte. Such a process can enable researchers like me to best the returns of hedge funds several times over.

One of my smartest clients I ever worked with is a manager in Atlanta who told me in 1992 to use the quantitative tools but do your reading. If you do both, then you are ahead of 95% of your competition as most managers and salespeople are lazy. “Le Fly” is not lazy. His readers are lucky.

I came to this website because one of my client told me about “Le Fly”. As I started to read him,  ”Le Fly” reminded me of one of my long time clients who busted the housing bubble. Just read the first three pages of House of Cards by William Cohan and you will see the similarities to Bennet Sedacca. Unfortunately, Bennet passed away in 2009 at too early an age but “Le Fly” is picking up the torch.

“Le Fly” is on to something here with this website, and we have been involved in other financial social media websites, and if you follow him then you to can learn much.

Hedge funds are going to have to morph their process if they are going to regain their edge. “Le Fly” has an edge in that he is showing you the reader how to make money, offer stops, educate and entertain you all for free. Such a deal.

One Response to “Hedge Funds Are F#$%ed”

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Hedge Funds Are F#$%ed

Quite the headline. But it is true and no one is talking about it. Why are they f#$%ed? Simply because many cannot cheat any more. That may be harsh but it is true.  Now they must pick stocks without the insider’s edge.

The insider’s edge consisted of expert networks, other hedge funds “experts” and corporate insiders that invested in their funds. The biggest funds have been lined with the Fortune 1500 executives. No more thanks to the shut down of Pequot several years ago.

Hedge fund returns suck this year. Just go to www.hedgeindex.com and look at the returns through the end of October. Dedicated Short Bias -13.56%. Long/Short 1.88%. Event Driven 3.60%. Equity Market Neutral 4.43%. S&P 500  14.96%.

Time and again in the last 26 years I have heard, “well we do not need the technicals or a quantitative model because our network is what is our advantage”. Not anymore.

The Galleon insider trading scandal has every hedge fund in fear, especially now. Why? Because until now most of the convictions for insider trading were due to the perps being on tape. The Level Global/Diamondback Capital verdict out last night took the fear factor to a new high. Both those firms are toast as Diamondback last week joined Level Global in the category of hedge fund being shut down.

Why? Now the hedgies are being convicted without being on tape. Simply the jury believes they are guilty. The convictions will continue for the next several years as the Feds have so much material it is like shooting fish in a barrel for them.

Personally, I like this. Why? Because now hedge funds need to more intuitive and use quantitative tools like the ones I work with to make decisions. A great example of this process was yesterday’s recommendation of Chipolte. Such a process can enable researchers like me to best the returns of hedge funds several times over.

One of my smartest clients I ever worked with is a manager in Atlanta who told me in 1992 to use the quantitative tools but do your reading. If you do both, then you are ahead of 95% of your competition as most managers and salespeople are lazy. “Le Fly” is not lazy. His readers are lucky.

I came to this website because one of my client told me about “Le Fly”. As I started to read him,  ”Le Fly” reminded me of one of my long time clients who busted the housing bubble. Just read the first three pages of House of Cards by William Cohan and you will see the similarities to Bennet Sedacca. Unfortunately, Bennet passed away in 2009 at too early an age but “Le Fly” is picking up the torch.

“Le Fly” is on to something here with this website, and we have been involved in other financial social media websites, and if you follow him then you to can learn much.

Hedge funds are going to have to morph their process if they are going to regain their edge. “Le Fly” has an edge in that he is showing you the reader how to make money, offer stops, educate and entertain you all for free. Such a deal.

One Response to “Hedge Funds Are F#$%ed”

Comments are closed.