Posts filed under “Really, really bad calls”
For a long time, the fund managers at Yale’s endowment were the industry’s gold standard. Inevitably, as in so many things Ivy, this was noticed by rival Harvard. The so-called Yale Model, developed by David Swensen and his colleague Dean Takahashi, was rich with alternative investments, private equity, commodities and real estate and other items that weren’t plain vanilla stock and bond investments.
The success of the Yale Model led to lots of copycats. The problem was that other schools could duplicate the look, but not quite the feel of Yale’s endowment investments, but without Swensen’s unique talents. He even wrote a book explaining how to be like Yale’s endowment titled, “Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment.”
For a while, Harvard came close to matching Yale’s success. It had a worthy rival for Swensen in investment chief Jack Meyer. At one point, Harvard Management Co. was throwing off superior returns. Fortune observed that the “120 or so people who work there are masters of short-term trading, initiating as many as 250,000 transactions a year. Their bets have often focused on undervalued situations and arbitrage opportunities in global stock and bond markets.”
But as Fortune reported in 2005, Meyer was paid more than $7 million dollars a year — seven times what Swensen was making. Paying successful managers handsomely looked justifiable. But it ran up against certain notions of Ivy League decorum. The negative perception of a richly compensated managerial team led to the sort of touchy-feely academic posturing that most of us in the real world find silly. Offended by the high cost of this talented team of managers, the brain trust that is the Harvard professorial class, with encouragement from alumni, forced changes that ultimately worked to the detriment of the endowment — and the university as a whole.
This was the big news yesterday out of California: The California Public Employees’ Retirement System (Calpers) today announced that it will eliminate its hedge fund program, known internally as the Absolute Return Strategies (ARS) program, as part of an ongoing effort to reduce complexity and costs in its investment program. The staff recommendation, supported by…Read More
U.S. policies toward Cuba are anachronistic and perplexing. The embargo is a Cold War relic that has long ago stopped serving its intended purpose. It was adopted after the now-defunct Soviet Union tried to establish nuclear bases on the island, bringing the two superpowers to the verge of nuclear war. But what purpose does the…Read More
Yesterday, we looked at why bankers weren’t busted for crimes committed during the financial crisis. Political corruption, prosecutorial malfeasance, rewritten legislation and cowardice on the part of government officials were among the many reasons. But I saved the biggest reason so many financial felons escaped justice for today: They dumped the cost of their criminal…Read More
“There Were No Convictions of Bankers for Good Reason” is the headline of a post by Mark F. Pomerantz, a lawyer and retired partner at Paul, Weiss, Rifkind, Wharton & Garrison in the New York Times’s Room for Debate discussion: The reason that senior bankers did not face charges, even though investigators interviewed countless witnesses…Read More
As I sat down to write this early this morning, no one knew what the jobs numbers would be. But I did know three related things: 1. The median forecast in a Bloomberg survey of economists is that 230,000 workers were added in August; 2. Almost all of the individual forecasters will be wrong. (Actually,…Read More
Earlier this week, Prudent Bear fund founder David Tice warned of an imminent crash — as bad as 30-60% down on the S&P500. One small thing: This is pretty much the same call that Tice made in 2010 and 2012. Apparently, if you make the same crash call every 2 years, most of the media…Read More
Student loans are the next great subprime crisis! At least that’s what the usual purveyors of doom and gloom say (see this, this and this). The numbers are big, the default rates are high and soon enough this is going to tip the economy into the next crisis or recession. Not so fast, writes…Read More
Last week, we discussed the problems with having poor reading comprehension and the impact that has on consuming news. This week, I want to look at the lack of math skills. America seems to becoming a dangerously innumerate society. Innumeracy is incompetence with numbers rather than words. This is a worrisome issue for the future…Read More