CNBC's Ron Insana closing his Fund of Hedge Funds

[Trader666]

If Insana had been willing to "do the work" and study Jack Hershey's methods, this may have had a completely different outcome

 

[Landis82]

Quote from Aaron Copland:

Of coarse they will answer the phone, moneys tight, they may have lowered the bar by now….. ever thought of that smart guy.

Once again you show yourself to be a total FOOL, with no clue about the hedge-fund business.

If you think that SAC will answer the phone for anything under several million, you are sadly mistaken.
Even former employees are barred from discussing the firm because they have had to sign confidentiality agreements!

No go run along.
I hear that your Mommy is calling you in for dinner.

 

[Thunderdog]

Quote from makloda:

...And regarding his fees being 'too high', as somebody mentioned above. If your returns are good, nobody - read: NOBODY WITH MONEY - will ask about your fees. If you can return 25% net of fees year in year out with very low volatility nobody will care if you charged 50% performance fees.

If being charged double fees but getting all of the downside of an uncertain outcome gives you absolutely no pause, then who am I to argue with the Perrenial Optimist Blue Sky Society?

 

[Landis82]

Quote from makloda:

That's half of the story. The breaking point seems to be that the likelihood of him raising $500m in the current environment - combined with his lackluster 12 month track record he compiled - is pretty much zero. That would leave him charging his 1% on his $100m (1m a year) without performance fees for another 12-24 months, while having to pay fees for staff, office and marketing. He would need anywhere from $500 to $1bln to have a viable business model. Many fund of funds operations are much larger. $2bln, $5bln etc.

And regarding his fees being 'too high', as somebody mentioned above. If your returns are good, nobody - read: NOBODY WITH MONEY - will ask about your fees. If you can return 25% net of fees year in year out with very low volatility nobody will care if you charged 50% performance fees.

Thank You for pointing out what others on this thread have been unable to comprehend.
Now feel free to give ThunderDog a basic lesson in Risk Management and Diversification 101A.

 

[makloda]

Quote from Thunderdog:
And wouldn't those "extremely intelligent, ultra high net worth, sophisticated people and firm" be able to deal directly with the funds, thereby sidestepping Mr. Insana's outrageous fees?

You fail to understand that sufficient diversification is of importance when investing in hedge funds. Many funds have a minimum investment of $250,000 - $500,000 or even up to $1m, or they're even closed to new money.

Let's assume you were one of those extremely intelligent, ultra high net worth, sophisticated people and let's assume you wanted to invest $2.5m of your money into hedge funds. You could get exposure to 5 funds @ 500k each, be relatively undiversified with the risk of a single blowup costing you 20% of your investment.

Or you invest 2x1.25m of your money into 2 different funds of funds with each giving you exposure to anywhere between 50-100 funds in exchange for the additional cost layer of 1+10% as the funds of funds do all the work and paperwork trading in and out of the underlying funds. It also means you have to go through the compliance process (source of your funds etc.) and paperwork only twice, instead of 30 times, if you wanted to invest with 30 funds directly.

 

[Thunderdog]

Quote from makloda:

You fail to understand that sufficient diversification is of importance when investing in hedge funds. Many funds have a minimum investment of $250,000 - $500,000 or even up to $1m, or they're even closed to new money.

Let's assume you were one of those extremely intelligent, ultra high net worth, sophisticated people and let's assume you wanted to invest $2.5m of your money into hedge funds. You could get exposure to 5 funds @ 500k each, be relatively undiversified with the risk of a single blowup costing you 20% of your investment.

Or you invest 2x1.25m of your money into 2 different funds of funds with each giving you exposure to anywhere between 50-100 funds in exchange for the additional cost layer of 1+10% as the funds of funds do all the work and paperwork trading in and out of the underlying funds. It also means you have to go through the compliance process (source of your funds etc.) and paperwork only twice, instead of 30 times, if you wanted to invest in 30 funds directly.

I think that an additional 1.5% of capital and 20% of performance is a high price to pay for Rolodex diversification by a media personality. And it's usually when people don't give a shit about ridiculous costs because things are so good that trouble is often just around the corner. Surely you can muster up a few historic (and recent) examples of that, eh?

 

[makloda]

1.5 + 20% is certainly on the high side for a FoF, I agree. 1 + 10% is probably more of a standard.

 

[Thunderdog]

Quote from makloda:

1.5 + 20% is certainly on the high side for a FoF...

You'd best take that up with Landis82:

Quote from Landis82:

The management fees didn't matter because Insana's "minimum" was only $500,000...

 

[WaveStrider]

SAC Capital Advisors, Renaissance Technologies Corp., Perry Corp. Third Point, Omega Advisors and Icahn Management


Those are all really great hf's.

Almost like you can't fail...

 

[runningman]

Quote from Covert:

Amazing- would you care to lay out the math you used to come up with this figure? It's simply not true, but I'd be interested to learn what you were thinking when you typed this

Do the math yourself if you don't believe it, prove me wrong.