Who's Afraid of a Little Third Degree Burn?

Author:
Updated:
Original:

The sector is managing $2 trillion, many of them are going public and you can’t swing your bag (I don’t do that) without knocking into a guy who works at one these days, but according to Jenny Anderson, there is no hedge fund bubble. We know what you’re saying—“it feels like a bubble, like 1999 all over again.” But feeling and being are two very different things, and even though your ass may very well be sitting in a moderately comfortable Aeron chair and shouting “tech boom, tech boom , tech boom,” your ass is wrong.
If anything, the spate of hedge funds and private equity firms going public indicates a shift away from a boom. Fewer and fewer shops, says Anderson, are taking major risks for remarkable returns, or “swinging from the chandeliers like George Soros” (something you really must see before you die, the man could give Cirque du Soleil a run for its money, we shit you not). No, the latest funds to go public have their eyes on amassing assets and coming up with stable (good) but unremarkable returns (bad…if you just want things to be like the used to…Brian Hunter knows what I’m talking about).
For the risk-averse, this is preferable:

In a June note entitled “Hedge Fund Management at a Tipping Point?”, Byron R. Wein, chief investment strategist at Pequot Capital Management, wrote: “Hedge funds are today’s asset gatherers. To gather assets, hedge funds have come to believe that they need to reduce volatility, and a number of hedge funds have given up performance to achieve it.”

So we’ve traded the bubble (and the threat of the burst) for safety and predictability, and (save for a few gems: Centaurus, Dillon, Kissing Someone With Mono Partners), no one’s going into work thinking that they could either make a billion dollars or get fired. And that makes us a little sad (though that might actually be the reactive lymphocytosis and atypical T cells).
How This Boom Differs From the Dot-Com Days: Hedge Funds Make Money [NYT]

Related

Hardcore Harvard Investment Group Soliciting Student Partners Who Aren't Afraid To Take Some Risks With Their Parents' Money

You're a Harvard undergrad and you want to beef up your resume so that in a couple years, top hedge funds will be begging you to take meetings with them. You figure joining some sort of on-campus investor group might do the trick, but there are so many to choose from it's difficult to figure out which one is going to be your ticket to the big leagues. Except it's not actually that difficult at all. In fact, the answer is quite simple. There are student investment clubs and there is Black Diamond Capital Investors. The former, piddling little after-school programs for, when it comes down to it, amateurs. The latter, an opportunity to put your balls on the table and make some real money. If that sounds like something you'd be interested, please have a check or money order for at least $1,000 ready,* which is the minimum investment members/partners must make, so that management can ensure everyone's got skin in the game. “Black Diamond is all about taking investments to the next level,” said Patrick M. Colangelo ’14, who founded the club last semester. He said that the mandatory minimum investment exists to ensure member engagement in the group, which is limited to 25 participants. "We select experienced finance students who are willing to put up the minimum capital contribution because we seek partners who will be vested in the operations and performance of the fund," Colangelo said. "It really gets the most out of our partners.” Member Arash Alidoust ’13 said he believes the buy-in is critical to the success of Black Diamond, which claims to be Harvard’s largest private growth fund. “It makes you much more concerned and much more innovative,” Alidoust said. “Black Diamond becomes part of your life.” And while the initial outlay be difficult for some college kids to swing, rest assured you're going to make it back many times over. Members said that Black Diamond’s investment strategy differs significantly from that of other financial groups on campus. Like the hedge funds it emulates, Black Diamond is a riskier investment than some of its peer groups, a risk which members hope will be rewarded. Colangelo said that the organization is aiming for a 30 percent return on its investment...“What Black Diamond has been created for is for investors who have a little bit of experience, joining a group of other experienced individuals who really want to do something different,” Colangelo said. Alidoust said that the strength and diversity of Black Diamond’s team of investors allows the club to break out of the typical “framework” of investing. “We encourage innovation and new ideas about investing, rather than just sticking with the old ideas,” he said. Exclusive Investment Club Asks Student Members for $1,000 [Crimson] *Though feel free to invest up to $20,000.