Artists Formerly Known As Hedge Funds Try Hand At Rebranding, Do Even Worse Than A.F.K.A.P.E. Funds

This is not to say "Carefully Considered Investment Products" doesn't have a nice ring to it.

"It's catchy, right?"

Remember back when Tony James did a little brainstorming about how to make private equity funds sound less evil, and came up with “clarity equity”? And how you thought, nothing could ever be worse than that, not even “Point72 Asset Management”? Well, Bill Ackman and friends are trying their hands at distancing themselves from the public perception of what a hedge fund is and, well, it’s worse.

Baupost Group LLC, Och-Ziff Capital Management Group LLC and Pershing Square Capital Management LP are among the industry stalwarts looking to change the script. In communication with clients and public filings, they have ditched the term “hedge fund” in favor of catchall descriptors such as “alternative asset manager,” “investment holding company” and “private partnership.”

Those are actually some of the better ones. Baupost is going with “a series of investment partnerships,” while Cliff Asness likes the slightly-less-cumbersome “Diversified Asset Management Company,” which has the added benefit of being so broad as to be essentially meaningless. But Och-Ziff’s “Carefully Considered Investment Products” is beyond doubt the worst, and not just because it’s not fooling anyone’s olfactory senses.

“If it looks like a hedge fund and smells like a hedge fund, it’s a hedge fund,” said Brad Balter, an investor in hedge funds at Balter Capital Management LLC in Boston.

Hedge Funds: Don’t Call Us a Hedge Fund [WSJ]


By Keith Allison [CC BY-SA 2.0], via Wikimedia Commons

Former Morgan Stanley Heir Apparent Now Best Known As Adviser To Former Baseball Player

Greg Fleming almost ran both Morgan Stanley and Merrill Lynch, but never mind that.

People Still Launching Hedge Funds Faster Than They Can Fail

Well, the numbers are finally in for 2012 and it was, relatively speaking, a bloodbath for hedge funds, with more going to their grave or down the drain than in 2010 or 2011. But there were still 235 more hedge funds at the end of the year than at its beginning, because those who have previously shuttered a hedge fund due to their failure to raise/make enough money gave it another go last year. Look for more of the same this year, as fresh-faced and not-so-fresh-faced hedge fund managers hang out a new shingle for a few months, only to find out that investors are only interested in having Ray Dalio manage their money.

By Photograph: en:User:Anubis3Medal: Gustav Vigeland (Self-photographed) [GFDL, CC-BY-SA-3.0 or Public domain], via Wikimedia Commons

Nobel-Pickers Better Hedge Fund Managers Than Nobel Winners

Robert Merton and Myron Scholes know what we're talking about.

The Smart Indexes Are Even Worse Than The Dumb Ones*

You may have heard that the Dow hit 13,000 today before subsiding to a shameful 12,965.69. You may not have heard this, or cared, because the Dow is for morons, being a price-weighted index of thirty semi-random companies that, gah, aren't even "industrial" any more.** There are alternative theories but those theories are wrong: Joe Weisenthal in defense of the Dow has been noting its very high correlation with other, broader, more sensible indexes. I see this as further undermining the Dow's legitimacy. If it's very different methodology were leading to some kind of meaningfully different result, then we could perhaps argue that it's adding value in some kind of way. But instead what's going on is that the Dow's creators are hand-picking which stocks to include in the index specifically with an eye toward constructing an index that mirrors the other, better indexes out there. Apple and Google, for example, aren't in the Dow and aren't doing to get in any time soon because their very high share prices would skew the index in weird ways. This just goes to show that the Dow's creators already "know" the right answer (from looking at the S&P 500 and the Wilshire 5000) and then are trying to assemble an index to create the predetermined result. Maybe! An alternative theory is maybe suggested by [Occam's razor and] this piece from the Journal this weekend about index funds that I just loved and so am now going to inflict on you at unnecessary length: