Recently, a good friend of mine who managed a hedge fund committed suicide - largely over the losses he'd incurred over the past year. He was consistently profitable prior to 2003 for many years (5+).
Many friends and acquaintances were invested in the fund and a self-propelling downward spiral began to occur in which my friend lost his psychological edge, investors became increasingly frustrated with him, and he became more and more isolated.
My purpose is to communicate this info to the ET community to emphasize the following:
1. Trading decisions are impacted by your psychological state - it's tough enough to extract yourself from a hole in trading - but it's even worse when you're carrying the emotional load of losing other people's money.
2. Even though investors in your hedge fund (or any other type of "pseudo" hedge fund may be long term friends or family members - just about everybody gets nervous when their investment trust in you is compromised.
3. When a fund "goes south", lawsuits often soon follow, probably wreaking havoc for a considerable period of time after the hedge fund is closed and even dissolved. These lawsuits often come from people who you thought would never sue you - thus driving the psychological impacts even further.
4. Investors in hedge funds must know of the risk for loss - and it must be beat into their heads continuously.
5. If what happened to my friend happened, then I assure you it could happen to just about any of you. My friend was a seasoned professional trader who was very emotionally stable.
6. I've never understood why folks want to invest other people's money - Yeah there's a profit motive - but statistically a very high proportion of hedge funds eventually fizzle or bomb out after having a great run. At a minimum, it is now my firm belief that hedge fund managers should never invest funds for family members or friends. He must retain a dispassionate distance from his investors and be able to interact with them on a 100% professional level - which is not possible with those he is close to.
All that said, I write these things to communicate the potential downside of such ventures. I can tell you that the family of this trader is now suffering far more (and will be for years to come) than the suffering incurred by the investors.
Still in mourning,
Swish
Many friends and acquaintances were invested in the fund and a self-propelling downward spiral began to occur in which my friend lost his psychological edge, investors became increasingly frustrated with him, and he became more and more isolated.
My purpose is to communicate this info to the ET community to emphasize the following:
1. Trading decisions are impacted by your psychological state - it's tough enough to extract yourself from a hole in trading - but it's even worse when you're carrying the emotional load of losing other people's money.
2. Even though investors in your hedge fund (or any other type of "pseudo" hedge fund may be long term friends or family members - just about everybody gets nervous when their investment trust in you is compromised.
3. When a fund "goes south", lawsuits often soon follow, probably wreaking havoc for a considerable period of time after the hedge fund is closed and even dissolved. These lawsuits often come from people who you thought would never sue you - thus driving the psychological impacts even further.
4. Investors in hedge funds must know of the risk for loss - and it must be beat into their heads continuously.
5. If what happened to my friend happened, then I assure you it could happen to just about any of you. My friend was a seasoned professional trader who was very emotionally stable.
6. I've never understood why folks want to invest other people's money - Yeah there's a profit motive - but statistically a very high proportion of hedge funds eventually fizzle or bomb out after having a great run. At a minimum, it is now my firm belief that hedge fund managers should never invest funds for family members or friends. He must retain a dispassionate distance from his investors and be able to interact with them on a 100% professional level - which is not possible with those he is close to.
All that said, I write these things to communicate the potential downside of such ventures. I can tell you that the family of this trader is now suffering far more (and will be for years to come) than the suffering incurred by the investors.
Still in mourning,
Swish
