The worst Hedge Fund Manager/Investor?

Some of today’s Hedge Fund Managers are so bad they shouldn’t even be handed a demo account.

Bill “the destroyer of capital” Ackman, is down more than half a Billion $ since Brexit only,

One of his notable achievements recently is holding the worst performing stocks, including a couple that failed to recover since Brexit despite the recent market rally.

In recent news, another criminal Investigation has been filed against Valeant Pharmaceuticals today, one of his most "controversial" holdings.

Original Articles here: http://fortune.com/2016/06/28/bill-ackman-brexit/ - http://fortune.com/2016/08/10/valeant-criminal-in…

How does he manage to retain his Investors? Any worse money managers you know about that manage to remain in business?

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The VRX options trade (it was a seagull) that was quite widely covered and discussed. IMHO, that trade was an absolute pinnacle of irresponsibility, poor risk management and basic lack of understanding of how things work. I have tried hard to find an explanation that would be a bit more charitable to Ackman, but I just couldn't.

I know it's just a single trade, but it suggested to me that Ackman is an accident waiting to happen (won't be the first time).

 
Best Response

I think anger should be targeted at those who decided to allocate capital to people like Bill Ackman. These are the real destroyers of capital and they all deserve to be fired.

There are plenty of excellent money managers out there, with excellent track records of performance, based on substantive, quantitative data. However, most of these people do not seem to have strong relationships with fund allocators, since they aren't part of that investment management 'inner circle'. Instead, you've got incompetent morons who are allocating capital to people based off of relationships/emotions, rather than any substantive data relating to performance.

There isn't any other explanation for the level of egregious incompetence I have witnessed from many fund allocators. Bill Ackman's history is a good example of this.

I have zero sympathy for anyone who loses capital. Welcome to the free market, gentleman. You will suffer the consequences of your incompetence.

 

Definitely more worse money managers than Ackman. It's just we don't know about them because a lot of managers had much lower AUM and are out of the business before they made the media.

Like @Martinghoul said, true value investors shouldn't be judged on the short-term, even though the media continues to do so. I don't see the point of articles titled "Greenlight Capital (David Einhorn) is down 5% in the month of March", but you see these kinds of articles all the time.

With bets like Herbalife, Valeant, and well-documented fight on MBIA (refer to the book "Confidence Game"), it was more than investing / business analysis, politicians / regulators got heavily involved and that's the kind of plays Ackman makes. So he knows he needs to create his own catalyst and it takes time for thesis to play out. It's him against the world a lot of the times.

 
BobTheBaker:

John Paulson is pretty awful, his fund is basically riding off the coattails of their '08 successes and haven't done much of anything since.

A trade he didn't even find - he fucked the analyst who originated the idea.
"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

OP,

On Forbes in March, when Valeant was already in the low 30's: "Although Ackman is saddled with his performance-destroying holding in Valeant, Pershing Square’s performance since inception is strong. His hedge fund has posted net gains of 567.1% since inception in 2004, a 17.1% compound annual return versus a 7.4% annual return for the S&P 500. Pershing Square Holdings, created in 2013, has fared worse. It has posted net gains of 22.2% since inception, or compound annual gains of 6.9%, below the 15.1% gain of the S&P 500." So I'm not sure where you're getting your "destroyer of capital" moniker. Are you a disgruntled Herbalife distributor, perhaps?

That said, as jankynoname alluded to, LTCM was pretty bad. They did a little worse than 17.1% compound between inception and wind-down

Amaranth had a pretty spectacular blowout on nat gas. You should read about them

This guy, Owen Li, had a little $100MM hf and bet the ranch last December trying to make up for poor performance over the course of the year - he lost it all

As the banker in Southpark said: "aaaaand it's gone"

 

Martinghoul & Lizard Brain

Well I am really not making any reasoning over a short period of time:

http://assets.pershingsquareholdings.com/2014/09/Pershing-Square-1Q2016…

This is pershing's financials as of 30th April, which is of course, before the brexit and drops in his performance mentioned above, even before brexit, the first page of the report is very shameful "PSHG since inception net of fees up 0.2% vs s&p 55%"

Just wait for his next financials including recent events, this will go down in history.

To anyone taking his defence: would you put your retirement portfolio with this man? Adjust his 0.2% annualized to inflation and we will definitely have a big laugh over everyone who entrusted a cent to this man.

I really have nothing against him but it is above my understanding how he's still in business.

LTCM was definitely one of the biggest flops in history, again I don't understand why Buffet offered to buy LTCM after their crash, I mean why would he even consider that?

 

This is covered in the Lowenstein book. There was nothing fundamentally wrong with the short vol. book which is why Buffett wanted to buy it. LTCM just didn't have enough capital to keep posting margin during the period of vol. in '98. The only reason Buffett didn't buy it is because the legal contract was worded incorrectly and would have bought Buffett LTCM Holding Co., not the portfolio, and they didn't fix the error before the timer on the deal expired.

 

disagree completely on guy spier. I get his annual report and have met him personally. he's crushed the market since inception, has less than $500mm under management (most of his assets are family & friends), and while he loves social media, I think calling him a super douche is a stretch.

check your sources brah.

edit: I know he held horsehead, but had nowhere near the exposure mohnish pabrai had, so while that will hurt his returns, the last report I saw had him around 3x the annualized return of the S&P 500 since inception, I'd hardly say that's bad performance

 

I think Paulson in terms of dollars. An admittedly very dumb model: managing $10 billion in 2007-2009 he makes 100% on subprime trade, makes $8 billion for clients and $2 billion for himself. Then raises a ton of money in 2009 based on his subprime trade, up to $30 billion AUM ($600 million of annual management fee). Then loses about 50% since, so let's say -$15 billion. so net his clients lose $7 billion but Paulson is a billionaire. These numbers are probably way off, but you get the point.

 

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