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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While I agree that Bill Ackman is a terrible investor, I don't think it's fair to make judgements of this sort, based on specific short periods of underperformance, even those are pretty painful. My reasoning is somewhat different.
why in the world do you agree that Bill Ackman is a "terrible investor"?
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).
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.
Can't agree enough with you here. Pedigree/resume/marketing counts for a lot in this business relative to investment talent sadly
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.
how can the answer to this be anything other than John Meriwether? Dude has launched and blown-up at three separate hedge funds. I honestly have no idea how anyone gives him additional capital... he must be a complete beast in marketing meetings.
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.
care to elaborate?
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?
In answer to your final question, if I had to guess, as is usual with Buffett, he considered it because he could buy it very cheap. At the right price, it might have been an absolutely perfect trade.
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.
LTCM positions were fine, it's just the "market stayed irrational longer than they could stay solvent". At liquidation, Buffet could have bought them at a significant discount. Buffet does arbs from time to time too.
Since inception 12/31/12. I don't feel like reading anymore into his returns other than knowing they are much better than the incorrect Pershing figure you are quoting. Valeant was a mistake, but every good investor makes mistakes.
meriwether is a good one. I'd argue john hussman, though not a hedge fund, is one of the worst investors out there.
guy made a killing in the tech bubble and didn't lose much in 2008 but has been dead wrong outside of that.
I would read his weekly columns for a while and then decided 'why am I doing this to myself?'
Same here, read them for a while and then it basically became some new and better metric saying the market is overvalued and how it's bound to crash at any moment. Not saying it's not empirically sound, but when you're wrong for the better part of a decade, maybe you should stick to research instead of money management
kyle bass
I thought he did fine on subprime, Greece, and Yen deval. He hasn't done so well the last two years with oil, but where else has he really screwed up?
bernie madoff
Gartman. I'd like to see the results of a portfolio run from taking the opposite side of his recommendations. Come to think of it I'm not actually sure he runs money.
Been reading ZH?
whitney tilson guy spier (this guy really is a super douche, calls himself a "superinvestor")
both marketing machines, with a good amount of AUM, yet very poor returns.
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
The last annual report of spier's i've read was 2015 (haven't read 2016), and to my memory, he was still getting returns of
I just saw Tilson's returns, they are comical. Cumulative return of 3% since 2010 (as of year end 2015) smh.
How you find Ackman one of the worst hedge fund managers is beyond me, clearly shows your complete and total lack of knowledge over the industry... No need to say more.
PS He locked in +$1.5b in net profits on his 3 year Canadian Pacific investment last week.
I would like to propose a generalization... I think, as a rule, the more vocal, public and high-profile a manager is, the less long-term value they're likely to add.
+1 could probably extrapolate this to a number of other fields
Owen Li http://www.bloomberg.com/news/articles/2015-12-16/canarsie-capital-foun…
wow how do investors with billions find suckers of this quality..
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.
on a similar note, I'd be curious to see how michael burry and anyone else who profited during the crisis has done since then.
Same here. I believe Steve Eisman (Mark Baum) started another fund and then closed shop after 2 years.
http://www.wsj.com/articles/emrys-partners-hedge-fund-shuts-down-140441…
Paulson's returns since '08 have been historically bad. Ackman is an activist - he effectively runs a long only. He will crush the SPY w/ high Beta names in bull markets. Ackman isn't the worst, but I certainly don't worship the ground he walks on like some people have / do.
Paulson & Co lost another $3 billion in 2016...
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