The Hedgie Who Didn’t Like to Short

Legg Mason’s sterling reputation, built largely on the back of Bill Miller and the fawning media that chronicled his every move, is starting to tarnish at the edges or perhaps singe at the edges, given the stock’s big blowup last week- (LM chart)

Investors who recently put money in Miller’s flagship fund Legg Mason Value Trust (LMVTX) are likely regretting that decision with one and three year returns that are bottom of the barrel.  But investors might want to take a closer look at the Clearbridge operation that LM acquired recently from Citigroup.  Now headed by Brian Posner, another Hedge Fund manager who folded up the tent at his Hygrove Partners, he recently brought aboard fellow University of Chicago alum Robert Gendelman who the NY Post so accurately portrayed in its puff piece “Hedge Fund Escape” (NYPost)

Unlike the more measured pace at Legg Mason, where his days are often spent on research and meetings with companies in his portfolio, Gendelman often did not have time to catch his breath at Cobble Creek. “I also felt uncomfortable with the necessity to short stocks,” he says, referring to the controversial practice of borrowing stocks and then selling them, hoping to make a profit by returning the stocks later after the price drops.

Don’t get us wrong. We love the NY Post.  But investors might want to closely monitor this fund family for further signs of underperformance.  Hiring your biz school buddies who could not generate alpha in the long/short world might comfort Posner, but it is likely to leave investors feeling blue. So we will be keeping an eye on these two former Hedgies as they go back to investing the money of poor suckers who don’t know any better.We are putting these guys on double secret probation.

Stay tuned for updates as we initiate our new feature ….

Double Secret Probation
Watching the guys who are watching your money

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