Harris Kupperman on the hedge fund business

It's a lifestyle business.  I'm going to be doing this for the rest of my life probably.  I actually enjoy it.  Like I said, this is my hobby.  Made a bunch of money.  I don't do it because I want to make more money.  I make it because I want to be in the game.  I want to beat the S&P 500, but more important, I want to beat all my friends who I think are top-notch, 0.1% hedge fund managers.  I want to beat them, too.  That's what I'm passionate about.

~ Harris Kupperman, "How to Scale a Hedge Fund | Harris Kupperman on Praetorian Capital," The Monetary Matters Network, November 6, 2024

Harris Kupperman on politics and investing

I tend to wear my politics on my sleeve; I hate both parties.  I don't like government regulation.  I don't like rules.  I'm more of a Ron Paul kind of guy.

[...]

We're going to own gun stocks, we're going to own oil and gas, we don't do ESG.

[...]

It's a trust-based business.  You can't really hide who you are.

~ Harris Kupperman, "How to Scale a Hedge Fund | Harris Kupperman on Praetorian Capital," The Monetary Matters Network, November 6, 2024

Julian Robertson on long-short investing

Our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business.

~ Julian Robertson, 1932-2022

Kevin Duffy on GameStop madness

While I'm not shedding any tears for the big hedge funds getting crushed by swarms of Robinhood day traders, this is a warning - exactly the kind of insane behavior you would see at a generational top. I follow the stocks of retailers pretty closely.  On a good day, GameStop (GME) might be worth $2 billion.  It hit a market cap of $30 billion yesterday and is set to open up 70% (after getting being down 44% yesterday). 

We've lost sight of the fact that the financial markets exist to efficiently allocate capital.  Mock and destroy that function and you've done the same to a functioning economy.

As Charles Mackay warned in Extraordinary Popular Delusions and the Madness of Crowds (1841): 

Money, again, has often been a cause of the delusion of the multitudes. Sober nations have all at once become desperate gamblers, and risked almost their existence upon the turn of a piece of paper.

~ Kevin Duffy, Facebook post, January 29, 2021

The Washington Post on quantitative easing

We can argue all day long about whether quantitative easing policies from the world's central banks are doing much to help the economy. But this much is for darn sure: It is boosting a wide range of financial markets ... So, why are some of the people who you would think would be the biggest beneficiaries of this strategy so angry about it? That was the consistent tone among titans of the hedge fund industry at the Sohn Investment Conference conference [sic] Wednesday ... Zero interest rates from the Fed haven't sparked inflation; interest rates have fallen despite huge government deficits; and the stock market has risen steadily in the face of a still-weak economy ... it may just be more convenient to blame the (bearded) man behind the curtain as the master market manipulator than to own up to your mistakes.

~ The Washington Post, May 9, 2013

Jack Welch on hedge fund manager David Einhorn

Apple (AAPL) deserves better than the treatment it's getting from David Einhorn.

Look, these guys are after a quick hit. I'd blow him off. I'd give Einhorn the back of my hand.

~ Former GE CEO Jack Welch, CNBC, March 8, 2013

Heroic Hugh Hendry on politicians vs. hedge fund managers

The reality is that global macro managers like myself have been thinking about these issues and have been articulating our great fears not for 10 weeks, but for 10 years. And therefore, I'd say to the politicians, we're smarter. We actually know what their next step is before they know it.

~ Hugh Hendry, CIO, Eclectica Asset Management, GAIM International conference, June 2010

Ben Stein is not a fan of hedge funds

These simulacra of hedge funds are going to completely change that world. That is the wave of the future. If you’re getting the same results as you get if you’re paying 2 and 20, why not go with the $5,000 minimum investment and the fee of $100?

Financial theory tells you that you cannot beat the large indexes unless you are getting inside information, and I don’t want to be part of anything that involves inside information.

~Ben Stein, actor, investor, financial markets observer, Bloomberg Brief, April 26, 2011

Dennis Gartman on the time horizons of hedge fund managers

You're a hedge fund manager. I'm a hedge fund manager. We live in a world where if we can get through to next Tuesday, that's important and that's as far forward as I can look.

~Dennis Gartman, "The Commodities King", author of the Gartman Letter, CNBC Fast Money, May 11th, 2010

Charles Schwab on short sellers and regulation of hedge funds

Q: With the SEC trying to crack down on short-sellers, do you see regulation of the market going too far?

A: It's very natural for us all to overreact in times of stress, but I'm not a fan of unmitigated shorting. We have nearly $2 trillion in hedge funds that simply don't have any reporting responsibilities.

~ Charles Schwab, "Chuck Schwab on Scary Markets and Election '08," BusinessWeek, July 16, 2008

Bethany McLean on the futility of financial regulation

A couple of years ago, if people were to point at who was going to bring down this system they would have chosen hedge funds. Lightly regulated vehicles, who knows how they're operating, they're going to be the cause of the next financial collapse. Lo and behold, hedge funds, for whatever problems they have, have actually not been in the center of this. They're one of the few groups not in Washington asking for a bailout. Citigroup, one of the world's most heavily regulated institutions, is. So that to me is the perfect example of why regulation is not a cure-all. (10:45 of interview)

Real transparency would be a great step forward, but I am always a skeptic about the ability of new regulation to really address problems. You look in the wake of Enron: Congress passed Sarbanes-Oxley which was supposed to fix all of the problems in the marketplace. And lo and behold, what happened this time around had absolutely nothing to do with Sarbanes-Oxley. It was irrelevant to the current crisis. (7:45 of interview)

~ Bethany McLean, Interview on PBS NOW, January 31, 2009

BusinessWeek on hedge fund dumping of leveraged loans

Perhaps nowhere has rapid-fire selling been more pronounced than in the $500 billion market for so-called leveraged loans. In recent years companies sold these securities to finance private equity buyouts, acquisitions, and other corporate deals. But hedge funds, which lined up to buy the loans during the boom, have been off-loading them in recent weeks to meet redemptions and margin calls.

Highland Capital Management, a $38 billion money-management shop that invested heavily in this arena, has been among the most aggressive sellers of leveraged loans. Highland declined to comment.

The sell-off by hedge funds and other investors is depressing loan prices. In recent weeks the value of the typical loan, according to research firm Standard & Poor's LCD, quickly dropped from 85¢ on the dollar to just 66¢, a deeply distressed price usually reserved for companies that are in bankruptcy. (Historically, investors have recovered 70¢ on the dollar when a company defaults.)

Yet few of the companies whose loans are trading near those prices, including utility TXU Energy and credit-card processor First Data, are in such dire straits. "The loan market is a very funny place right now," says David Ford, a founding member of Latigo Partners, a hedge fund that buys distressed investments. "It's not being driven by fundamental forces."

In essence, the market is suggesting that owners of such securities won't get their money back. That unlikely scenario has some market observers scratching their heads. In the event of bankruptcy, investors in leveraged loans are the first to be repaid, outranking other holders of corporate debt and stock. And many companies today have more than enough assets on hand to make their loan investors whole. For example, Tennessee-based Community Health Systems (CYH), whose loans are selling for roughly 75¢ on the dollar, has $9 billion in assets, far more than its $6 billion in loans.

~ BusinessWeek, "The Hedge Fund Contagion," October 22, 2008 (Nov 3. issue)

Nassim Taleb on hedge funds

I think the hedge funds that we have today, a lot of them are going to disappear and they deserve to disappear. A lot of them never made a penny for their clients, they're taking a lot of hidden risks - they looked good, but in fact they were hiding a lot of hidden risks. But I think there's a role, hedge funds to finance companies, by mature hedge funds - those will survive. You're going to have, of course, survival of a different class of people from the ones who thrived during the Greenspan-Bernanke era. So you will have hedge funds taking risks... but then... society - the responsible people - is not there to bail them out. They'll take risks, but the class of risks they'll be taking is going to be more on the equity side than on the debt side.

~ Nassim Taleb, "A conversation about economics with Nassim Taleb," Charlie Rose, December 3, 2008

Kevin Duffy on hedge funds

Like weapons and derivatives, there is nothing inherently evil about hedge funds, just sometimes the people who operate them. We have been highly critical of most of the professionals in the investment industry, largely because they've been full of themselves, overcompensated, unprepared for tough times, and pine for government intervention at the first sight of negative news.

~ Kevin Duffy, Bearing Asset Management, November 14, 2008

Bill Laggner on hedge funds, SEC disclosure fight

You are getting more and more layers of intervention in the most entrepreneurial piece of the investment world. There is a real sense of frustration about this because people want to keep their strategies under wraps. And as long as it is legal, why is the government looking?

~ Bill Laggner, "Hedge funds gird for SEC disclosure fight," Forbes.com, October 3, 2008

Citadel's Ken Griffin on market sentiment

I have never seen a market as full of panic as I've seen it in the past seven or eight weeks.

Ken Griffin, founder, Citadel Investment Group, "Citadel's Griffin says firm will change amid turmoil," MarketWatch, October 27, 2008

Despite big losses from Citadel's main hedge fund this year, Griffin said that the recent turmoil has created the best opportunities he's seen since he started trading roughly 20 years ago:
"We're very excited about the positions in our portfolio in the months and years ahead."

(Citadel's largest hedge fund, known as Kensington/Wellington, fell 35% this year, through Oct. 17, according to Chief Operating Officer Gerald Beeson.)

Ed Easterling on hedge fund regulation

Q: Do you agree when people say hedge funds are lightly regulated?

Easterling: No. It's another myth. Hedge funds are required to comply with every rule, regulation, and law that affects virtually all investors in the financial markets. Then there are a variety of investor-related laws and regulations that impact who can invest with hedge funds. There are state and federal laws that require some managers to register as investment advisers—which adds additional regulations and requirements, including periodic examinations and filings.

~ Ed Easterling, "In Defense Of Hedge Funds," BusinessWeek, July 9 & 16, 2007

Goldman hoping for large hedge fund launch

The investment giant is trying to raise $4 bil-$6 bil for what would be one of the largest hedge fund launches ever, according to the Financial Times. The new Goldman Sachs (GS) hedge fund will focus on selecting stocks, rather than using a computer-driven strategy tied to big losses at its Global Alpha hedge fund. It rose 3.3% to 216.48.

~ Investor's Business Daily, "Goldman Aims High With New Fund," November 26, 2007