At the end of each year, when the numbers are in re: which hedge funds had the best performance and, more importantly, which ones had the biggest profits, those nowhere close to the top would kill in cold blood to determine the secret to their vastly more successful colleagues’ (if you can even call them that) success. The fools will assume easily replicable tactics like in-depth research and a top-notch ability to (legally!) get information first are the edge employed by firms taking home billions upon billions. The wise ones know there is more than meets the eye.
At PIMCO, for instance, a daily shimmy down the trading floor keeps the Newport Beach-based operation in the money. At Bridgewater, it’s interrogating co-workers about every little trade with an intensity level not found at Guantanamo Bay. At Moore Capital it’s the prioritization of Louis Bacon’s time and breath. According a new profile out today by reporter Kate Kelly, the veteran hedge fund manager is loathe to waste either– not on children trying to squeeze him for an extra twenty bucks a month, not on know-nothing investors, and certainly not on worthless traders he’s already written off.
Bacon is non-confrontational. At times he has used indirect methods to get his message across, say associates and people who have worked for him. In contrast to a rival like SAC Capital founder Stevie Cohen, who is famously vocal when he disagrees with a subordinate’s trade, say these people, Bacon finds a more subtle way to undo what he views as the potential damage: He sometimes retreats to his office and places an opposing trade, a tactic that hedge fund mavens call “fading” a colleague.
Yes, a kinder, gentler manager might take the time he shows you he cares by getting “vocal,” but not Bacon. He stopped caring the second you started losing him money and, in the event it wasn’t abundantly clear, being yelled at = still a potential “teachable moment,” whereas being burned behind the scenes like this = you’re a lost cause who just doesn’t get it that Bacon refuses to squander one more moment on as you burn his bottom line. Call you in to have a 5 or 10 minute chat about your thought process? How about instead, you use that time to pack up your shit and hit the road.
Think clients paying 3&25 are thrown a bone? Then you’d best think again.
During meetings with analysts or even investors, say people who have attended them, Bacon, who often draws the blinds in his private office, frequently turns to his lieutenants to answer questions, often sitting silently through the presentations.
That’s right, because, as previously stated, he doesn’t waste his breath on those who haven’t demonstrated to him they’re worthy and you? Are simply a leach on his P&L until proven otherwise. If that seems harsh, just know that 1) he does it not be cruel but to keep the money train on track and 2) no one, not even those related by blood, get a free pass.
One longtime assistant negotiates annual spending allowances with the elder of his children individually, say people familiar with the matter. Once they’ve agreed on a number, the assistant invites the child in for a sit-down meeting with his or her father, during which Bacon usually signs off on the terms.
Signs off, but doesn’t comment, natch. Now, in the event he deigns to utter a single word in your direction? You’ve either done something very, very right or he figured out the creative accounting you used on last year’s allowance balance sheet and you should get out of town, NOW.