Quote from thoreau777:
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If you knew Victor's fund performance at the end of this past year, you will cut your right arm off and give him your daughter for the opportunity to invest in his fund. Did you know that at many times he multiplied his money thousands of percent in a year, especially after his most difficult periods? That famously he turned $50,000 into nearly $50 million?
Thoreau, it's admirable that you have stuck by your friend. We all can appreciate friends like that. But is it a fact or not, he blew up twice? I have read about this fellow and there are indications that he is likely bi-polar. A very treatable mental disorder. The bi-polar people I have known personally were, without exception, bright, charming, and energetic, in their manic states at least. Their exploded egos were also a prominent feature. I don't know if Mr. Niederhoffer is bi-polar, I am just suggesting that he could be.
In any case, his track record, the probability of his being bi-polar, and the warning sign presented by repeated returns of high two figures or greater should be more than enough to steer any prudent investor away from him.
Because of the relationship between risk and reward in the financial markets, the statistical probability of achieving exceptionally high returns repeatedly without high risk is very low. With hedge funds, high risk is often associated with too much leverage being used. Regardless, only gamblers and others willing to take on very high risk should place their money with such a manager.
Let me add that there may be apparent exceptions to the risk reward relationship, but on close examination these "exceptions" will be found to result from access to inside information (having the Treasury Secretary as a friend could be helpful), illegal activity, or the ability to directly influence market direction. In other words, in these exceptional cases, the risk is not what it is presumed to be. Mr. Niederhoffer, does not seem to be an exception.
