This weekend, I found myself in the rather unusual position of defending hedge funds. Before I explain why that is so unusual, allow me to explain what I was defending them against.

Last week, Forbes released its annual score card of top-earning hedge fund managers. The usual gang was there: Soros, Tepper, Cohen, Paulson, Icahn, Simons, Dalio, Griffin, et. al. That clickbait scorecard — it worked on me — and led to a strident column from Gawker, bizarrely titled “Fund Managers Are the Biggest Gangsters of All.” Noting that the top 25 managers made a combined $24.3 billion in 2013, Gawker concluded, “The biggest thugs of all operate fully within the law.”

Which is completely and utterly wrong. The real gangsters were the “Banksters” who helped bring down the economy in the financial crisis, along with their lapdogs in Washington. To literally talk my own book, “Bailout Nation“: If you want to see truly thuggish behavior, look at three decades of radical deregulation, plus a gutting of enforcement mechanisms.

Continues here



Category: Hedge Funds, Investing, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Hedge Funds: Bad Investing Versus Lawlessness”

  1. Moss says:

    Thugs do exist in the hedge Fund universe. (Cohen, Raj.) I wonder how many would be in business w/o the favorable Tax treatement. The Carried Interest tax treatment is a huge scam for the few at the expense of the many. Hedge Funds are just another version of a Compensation scheme just like the bankster bonus pools.

    • I agree with you — but the response is to direct our anger against 1) Insider trading; 2) Carried Interest nonsense.

      To merely criticize them for making “too much money” misses the points you are raising

      • Moss says:

        The manner in which they make money is objectionable. First off they are discriminatory in that only the richest, deep pockets can invest. They are also guilty of collusion in many cases. They do not add any real value to society. Activism = green mail in most cases.

      • They are proscribed by corporate structure to 99 limited partners

        And Discriminatory? Why would you want to invest in an overcharging, under performing vehicle?

    • rd says:

      Insider trading and the carried interest BS clearly need some attention. However, the prosecutions for insider trading have just been a diversion to keep the attention away from the real prosecutions that should have been done in the banking and mortgage sector for crimes that are orders of magnitude bigger and more systemically important.

      The poor results of many of the hedge funds in the next bear market will whittle the sector back down to a rational size dominated by the real talented ones.

  2. catclub says:

    The article is better than the title ( not the first time for a click-bait article)
    it does target the carried interest loophole.

    If it had said that besides rich people throwing their money at even richer people, pension fund managers were throwing away the money of less rich people – it could have been written by Barry Ritholtz.

  3. DeDude says:

    It is not illegal but surely should be for public pension funds to invest in funds that charge according to the 2/20 scam. It clearly is a lousy business decision and the only explanation for them doing so is corruption. Similarly it should be illegal for any public pension fund to own any stocks in companies that fail to put a cap on the compensation for their CEO at more than 250 x the salary of their lowest paid employee.

  4. [...] allocations, recently “the expensive disappointments of the portfolio” and subject to widespread criticism, are up to an average of 14.1 percent from 12.5 percent last year, with all alternatives [...]