Busted Hedge Funds & Fund BS
Last week we noted the imminent closure of Blackstone's distressed-debt hedge fund. Here's more about it - and about illiquid funds generally. It's been a rough year+ for hedge funds.
And speaking of alpha (cough), we can't think of a better argument for 2-and-20 than getting profoundly middle-of-the-plate market advice like shorting retail! What genius!! C'mon Lasry. With hedge funds under siege, you'd think that someone with the reputation of Lasry could conjure up some originality here and actually "deliver 'alpha'" - whatever that means these days.
In the even-less-alpha category, Eric Mindich is closing his $7b hedge fund, Eton Park Capital Management LP, after a flat '17 and a 9% loss in '16 - a year when millennials putting money into an index fund through Acorns and/or Wealthfront returned 12%. According to the WSJ piece linked above, the one thing Mindich is delivering is "more of the same," considering over 1000 hedge funds closed shop last year - giving new significance to the derogatory descriptor "hedge fund hotel" (Valeant Pharmaceuticals and SunEdison, anyone?). We particularly loved the kicker in the WSJ piece which was that the closure was "party due to concerns declining assets would make it harder to retain employees," a mind-boggling assertion that, if true, merely reflects a lack of awareness that (a) again, 1000+ funds have failed in the last year (see, e.g., Perry Capital, as just one large example), (b) hedge funders everywhere are screaming bloody murder about comp (as always - such whiners), and (c) it should, at least conceptually, be pretty difficult for those employees to find an alternative with such an atrocious track record looming like an albatross. Finally, as one banker subscriber wrote in to us, "Because they'd rather not have jobs?" Riiiiiiight.
But have no fear. Management probably needs a few lifetimes to burn through the billions of dollars earned to date. Maybe Mindich will even join the bevy of Goldman brethren moving to Washington DC. Nothing would surprise us. This failure notwithstanding, he could always change course in a few years after a downturn and give it another go. He'll get money: hedge fund failures are like tech failures. In the absence of gross negligence or actual fraud, they're almost assured of getting a second bite at the apple from sycophantic suck-up former investors who want in on the next big shiny finance vehicle...