Valuable investment management is simple but not easy. The investment world is full of hares that seem at times, to be sprinting ahead at breakneck speed. And in a world of short attention spans and systemic impatience, hares often attract great interest.
But the thing is this. In the long and medium run, it is humble turtles that win the money race. Turtles win by collecting steady, low risk gains, not losing capital and sticking to their buy and sell discipline in good markets and in bad.
Like the Tech funds managers before them, from 2003-2007, hedge fund managers attracted enormous capital and adoration. As commodity markets went parabolic, those “genius” enough to keep playing them were proclaimed prolific. And now we come full circle.
In the down cycle that began last October, high risk managers have been falling on their swords. Hedge funds that once sprinted on ahead are now trying to quietly close their doors. This is a very old story. The managers are sorry and bow their heads. The leverage that was a wonder drug in the bull market becomes a lethal potion in bears.
This week the next “surprising” casualty is the demise of the once exalted Ospraie Fund, the flagship fund of Ospraie Management, the commodities-focused money manager. Having lost nearly 39% of its value this year — or almost $1.3 billion, with more than half of that in August alone — the fund is being wound down. No longer pushing for returns on their money, investors are now hoping for just the return of some of their money. For several years Ospraie enjoyed a solid reputation. It appears they have been hurt by the rapid fall in resource companies, particularly in energy and mining. Apparently they have been taken unaware.
“That such a large, experienced fund manager was tripped up doesn't bode well for many others who have crowded into the commodities bull market.”
See WSJ: What Ospraie taught us.
Meanwhile in the category of “I wouldn’t be surprised” comes this story today in the WSJ: Oil supply data probed for manipulation. Park prediction: next will come a wave of managers and investors who will claim that they are not responsible for big losses to capital, because they relied on other people’s data to make their bullish bets. Cue the lawyers.
Away from the thunder and the fray, we turtles will methodically and humbly continue to advance.
Cory’s Chart Corner
- Boom-Bust repeat. History calls B.S on "it's different this time", it's always different.
h/t Jessie Felder
about 9 hours ago
- Very impressive...however, given we're a consumption led economy, robots will become just another channel of wealth… https://t.co/OcCREIZbuL
about 12 hours ago
- What determines an inverted yield curve w/QE distortions and a short end at 1.25%...does the 10 yr really have to g… https://t.co/9NEwz1H25x
about 2 days ago
- Boom-Bust repeat. History calls B.S on "it's different this time", it's always different. h/t Jessie Felder
“An explosive critique about the investment industry: provocative and well worth reading.”
“Juggling Dynamite, #1 pick for best new books about money and markets.”
“Park manages to not only explain finances well for the average person, she also manages to entertain and educate, while cutting through the clutter of information she knows every investor faces.”