Losing Big: A Winning Wall Street Strategy
It never ceases to amaze me how hedge fund managers who suffer catastrophic losses are able to go out and raise money. But clearly I did not think it through; losing money of course makes them smarter, apparently:
Investors have a range of explanations for opening their wallets for failed managers. Sometimes, managers demonstrate that big losses made them smarter investors, or they offer to waive some of their hefty fees for those who got burned in previous funds. Some managers who had stumbled in the past, such as David Shaw of D.E. Shaw and William Ackman of Pershing Square, restarted their careers and generated big returns.
It can be helpful to have lost loads of money, rather than a smidgen of cash.
“It’s crazy, but the guy who’s down substantially often will have a lot more options versus someone smaller who hasn’t lost much money,” says Neal Berger, who runs Eagle’s View Asset Management, LLC and invests with funds. “Some investors will say ‘lightning doesn’t strike twice in the same spot,’ or, ‘there must be something smart about him that someone gave him the opportunity to lose so much money in the first place."’ WSJ
Investors might buy into failed managers spin jobs, but I am not. Wall Street is one of the few places lighting strikes twice.
Rebounds by Hedge-Fund Stars Prove ‘It’s a Mulligan Industry’
WSJ
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