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View Full Version : ?What have you done for me lately??



DaveLandry
07-24-2014,
The flipside of the performance chase.

?What have you done for me lately? How dare you miss a market trend? Why aren?t we on top right now? Is something wrong? Have you lost your edge??

The type of investor who is easily impressed by short-term performance is also really easily disappointed when a strategy struggles. It?s a personality thing. It?s what drives the behavior gap that Carl Richards talks about ? getting into the next hot thing at a top and then getting out at a bottom for the hot thing after that, ?repeat until broke.?

Look at Balestra Capital as a brand new example of this timeless cycle.

The fund?s manager was one of a handful of hedge fund guys that ?called the crisis? and profited from the market collapse. In the aftermath of the crash, having posted a once-in-a-lifetime performance, Balestra became a hot fund. This is the same thing that happened for the rest of the crash-callers.

Only that?s not a trick that anyone can pull off twice. And so absent a follow-up miracle, the investors get bored. They get restless as other managers appear to pulling miracles out of their asses.

And then the drawdown comes and it?s lights out.

Check this out, via the Wall Street Journal:

http://www.onlinetradersforum.com/attachments/fence-jpg.37492/

All the new investors who came banging Balestra?s door down to give them money after 2007-2008 are now wondering why they bothered. As Rob Copeland reports:

Balestra Capital Partners LP, founded by Wall Street veteran James Melcher, saw investors yank more than $600 million?or more than 60% of its assets?at the end of the second quarter, according to investor documents?Due to losses and redemptions, the firm?s main fund now has under $400 million, about one-fifth of its size two years ago.​

This is a fund that doesn?t appear to have made anyone money over the last five years. But you know exactly when it raised the most money, just by looking at the chart above.

Someone running a fund somewhere is going to get the next crisis exactly right. An ocean of money will come pouring in over the transom.

Unfortunately, there probably won?t be any follow-up miracle there either. But there will likely be disappointment.

Repeat until broke.