Remember Alphonse “Buddy” Fletcher Jr.? He's the veteran of Wall Street who last month laid out some tips for making your firm a runaway success. They included making math work for you (Fletcher says his firm has "more than $500 million of assets under management. But it appears to arrive at this figure by counting some assets more than once...A more orthodox way of measuring assets under management would produce a figure of about $200 million for one recent year."), getting creative with guarantees ("a former Fletcher deputy chief executive...says the use of the term "guarantee" [investors were promised 12%] was "colloquial" and not meant within "the legal definition") and coloring outside the line when it comes to fulfilling redemption requests. For instance, when the Firefighters' Retirement System of Louisiana said they wanted some of their cash back, instead of giving it to them, Buddy chose to send promissory notes that promised to pay up within two years." That response really chapped some hide in Lousiana--and prompted the firefighters to ask for all all of their money back-- particularly considering Buddy Boy and Co made a big show of how quickly investors could redeem during their pitch, which someone down south had the foresight to record.
When a Louisiana public pension investment panel met with a hedge fund it was considering hiring, it was told that the fund could liquidate its investments to raise money "in a matter of weeks" if needed, according to a video of the meeting reviewed by The Wall Street Journal...The DVD video recording of the investment committee in March 2008 shows a senior Fletcher representative saying the firm's investments could easily be liquidated. "When we make an investment, unlike a debt-holder or a real estate holder or a private equity investor, we can liquidate in a matter of weeks," said Denis Kiely, the Fletcher representative, in the video. "We can get our capital back.... Everything that we are doing, even if we are buying preferred stock or debt, we want to be able to get our money back in short order." A lawyer for the Fletcher firm, Marc Kasowitz, said in a statement to the Journal that before the pension fund invested, the Firefighters' representatives were "clearly informed" that "there could be liquidity issues based on market conditions at the time of redemption."
So! Tip number #4: Make sure to sweep the room for any recording devices before making claims that might later be used to make you look bad. TIP #5: if you plan to ignore TIP #4, then during meetings when you are pointedly asked about the speed with which an investor can withdraw money (with people in the distance whispering about "zoom"ing and "focus"), instead of answering "we can liquidate in a matter of weeks!" consider answering a question with a question such as "Fellas- does this look like a face that would give you any reason to pull out?", offering something a bit more abstract like "You tell me", or simply winking and making a double gun salute before quickly changing the subject to what's for lunch.