The number of hedge funds that closed their doors increased for the third straight year in 2012. Same song, different tune this year. It seems a different big-name fund closes each day, with clients redeeming billions from once high-profile money managers who just can’t seem to beat the S&P. There are plenty of valid reasons for the growing trend, but none as interesting and frank as the one provided by Stan Druckenmiller, who ran Duquesne Capital Management until it closed in 2010.
Essentially, Druckenmiller blames the government and, without naming names, Fed Chairman Ben Bernanke. In an interview with Goldman Sachs, the 60-year-old hedge fund veteran said that economic forecasting – the tool he and his brethren use to beat the market – only works in free markets, and we’re no longer in one. Today, with quantitative easing and other government intervention, the market is “rigged,” he said.
While acknowledging that the first round of quantitative easing was necessary to stabilize the U.S. economy, Druckenmiller said that continued efforts have compromised price signals to the point that veteran forecasters no longer have a competitive advantage.
“It's not predicting anything the way it used to and that really makes me reconsider my ability to generate superior returns,” he said. “If the most important price in the most important economy in the world is being rigged, and everything else is priced off it, what am I supposed to read into other price movements?”
An interesting argument for sure, and one that could explain how so many once-successful hedge fund managers are now running family offices, like Druckenmiller. On a sunnier note, he’ll be happy to know his good friend Ben Bernanke is close to tapering down the Fed’s $85bn-a-month in asset purchases. Maybe that will help un-rig the market.
Nomura is hiring aggressively in the U.S., particularly in areas like investment banking and fixed income, but some remain skeptical of the strategy. Nomura has a habit of exiting markets with the same speed as it enters them.
The most infamous boiler-room brokerage firm ever has been immortalized on the big screen. Directed by Martin Scorsese and starring Leonardo DiCaprio, “The Wolf of Wall Street” tells the real life tale of convicted fraudster Jordan Belfort. The trailer looks epic.
Deutsche Bank's capital levels are "horrible", according to a top U.S. banking regulator. "They're horribly undercapitalized," said Federal Deposit Insurance Corp Vice Chairman Thomas Hoenig. "They have no margin of error." Yikes.
Former UBS and Citigroup trader Tom Hayes will reportedly be charged by British authorities for his involvement in the Libor rate-fixing scandal. Hayes has already been charged by U.S. authorities.
Enjoy playing hoops, making money and helping charities? Try sending a resume over to New York-based Admiral Capital Group, a real estate-focused private equity fund co-founded by former NBA star David Robinson.
Bridgewater Associates’ highly-anticipated move to Stanford, Connecticut no longer appears inevitable. The world’s largest hedge fund has made no progress with the construction, calling into question whether the move, inspired by $100 million in tax credits, will actually happen.
Hermitage Capital Management founder William Browder fears for his life. If something happens to him, take a good hard look at Russia, he said.
Buzz Around the Office
“A recent report shows that in 40 percent of American families with children, women are the primary earners, yet they continue to earn less than men. What does this say about society?” Hopefully your answer would be better than Miss Utah’s. Ouch.
List of the Day: Advice for Grads
If you just graduated from college, finding work can be tough. Keep these hints in mind.