Scratch what we said last week about hedge fund mania being offically over. On the contrary, the obsession has just now reached a fever pitch. Know how we know? Former Clinton Secretary of State Maddie Albright has joined the party, with Albright Capital Management. Is the arrival of ex-government officials/investing-neophytes (Richard Breeden got in on the action last week) a product of doors being opened to all by the "Everybody Clap Yer Hands And Say Hedge Fund!" movement (aided by things like Hedge Funds for Dummies)? Maybe. But more importantly, can Albright and co. serve some sort of productive purpose, other than wetting everyone's appetite for Doug Ellin's new show? Daniel Gross says yes.
The most recent duo of public servants turned hedge-fund managers is seeking to apply public-sector experience directly to the management of private capital. Rather than buy and sell dozens of stocks and trade them quickly, Breeden, who has landed consulting gigs monitoring bankrupt WorldCom and investigating shenanigans at Conrad Black's Hollinger, said he planned to buy a handful of stocks at undervalued companies—and then use his status as a corporate-governance expert to prod management into boosting shareholder value.
Albright is taking this practice a few rungs up the value chain. Rather than simply sell advice based on her experience and connections, she's selling investment-management services based on her experience and connections. Investment management has much higher profit margins.