15 years is a long time to pull “modest” amounts of money, fees, self-deals to keep himself net-whole, while pushing all the risk and loss to the hedge fund outside investors.
I thought this was a pretty good look at how hard it is to run a successful hedge fund.
John Paulson was the man who famously had a bonus of billions in 2008/2009 for his subprime mortgage bets. Since then he's had a pretty tough ride with losses almost ever since.
This was not a hedge fund, it was a family office, a vehicle he chose after his last hedge fund blew up in 2013 and he was fined for fraud. He chose a family office probably because the disclosure requirements are not as arduous as hedge funds, then he lied to lots of banks about his exposure to ramp his own stocks multiple times by buying on margin with multiple partners, till it seems the banks found out and the last banks out were left holding the bag.
Classic doubling down on failed leverage and classic signs of the massive bubble in financial assets about to implode.
The hedge fund still needs to be compensated for their time and skillset. In my life, time is the most precious resource I have. This investor's rant has a paradoxical comical impact for a rich man's tragedy.
Yes they are maybe %1 - I was able to get %2 at 15 years. And hedge funds get money from investors then leverage that with loans that brings their total cost of capital down even lower. Our previous Secretary of the Treasury (Mnuchin) made his fortune that way after 2008.
I believe most hedge funds also charge a fee on total assets under management regardless of profitability, so he’d be profiting just by luring in new customers, profits not necessary.
I am imagining this "hedge fund manager" as some guy who had a fair amount of wealth - but a greater, wealthier, social network. He spent some time pulling from this network to develop a fund, which he would manage to make all his friends rich, himself even richer.
He has been frothing for this opportunity, ever since he missed the Google boat. At the time of the goog ipo, he was a lowly broker with little funds to leverage.
Since then he has been viciously ambitious. He has built a name for himself and a powerful, if flawed, circle of acquaintances.
He was successful in frothing up his circle, convincing them that he could make an FB focused super fund and make them a killing!
He gathered up $200MM from his network and put a crazy bet on the stock.
He lost - all his credibility gone, a loss which was thought to be a sure thing. He is ruined!
Especially since now that the loss is here - it will be revealed that he committed many millions to purchases on this expected cash cow!
His bills are due, and he owes $30MM TOMORROW for everything he used funds from his network's input to pre-buy!
HE IS FUCKED!
But, he has a really nice yacht to attempt to flee to Bermuda on...
The hedge fund? Wrong. I have those returns too. Ever wonder why neither he nor anyone talks about his returns? It’s not a conspiracy...
It is insane to me. We detest more than anything the notion of the high fee hedge fund manager who gets rich while his clients lose money, but the world gives Chanos the biggest pass of all time. This is a guy who has made something like $1 billion pre-tax and pre-divorce while his fund has just lost copious amounts of money over any relevant time frame.
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