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Hedge Funds, No Thanks!--The hedge fund apocalypse is here!
Hedge Funds? No thanks! 3-1-07
We're hearing a lot about hedge funds these days. Last year SEC Chairman Donaldson, former CEO of Donaldson, Lufkin, Jenrette advocated minimal regulations for hedge funds. This year, SEC Chairman Cox and Treasurer Henry Paulson have decided the public interest would not be served by subjecting hedge funds to federal oversight despite the fact that the pension funds of many ordinary Americans are increasingly being invested in hedge funds.
So far as I've been able to determine there is no accurate measure of hedge fund performance because of the absence of reporting requirements and because the performance of the unsuccessful ones that are dissolved and disappear are not included in the statistics that are available. Hedge funds offer the promise of higher than market returns at the price of higher than market risk. The typical management fees are 2% of the funds invested plus 20 percent of the profits. The managers, however, don't suffer any of the losses. Losses come out of the investors' hides. This fee arrangement provides and incentive for hedge fund managers to put investors' money into high risk ventures in order to maximize their return. It also provides an incentive for trading on insider information not available to the ordinary investor. This set-up is a recipe for disaster for ordinary folks. Of course ordinary folks aren't allowed to invest in hedge funds except vicariously with their pension money. Anyway, by now you correctly get the idea that I'm not an advocate of hedge funds.
Here is a link to a Slate article on hedge funds by Daniel Gross.
Warren Buffett Comment on Dismal Performance of Hedge Funds in Annual Letter to His Shareholders Feb 2017
In his 2016 letter, Buffett took special aim at hedge funds, which in recent years have faced persistent outflows of investor money because of poor performance, stubbornly high fees, and a broad move toward cheaper, passive options like index funds and exchange-traded funds.
Underscoring his long-held thesis that, over time, highly paid hedge-fund hotshots lose out to a cheap index fund, Buffett presented the latest results of a bet he made nine years ago. Since then, a standard S&P index fund overseen by Vanguard is up 85 percent, easily outpacing the hedge funds’ return of 22 percent. Annually, the gap is just as wide: 7 percent for the index fund and 2.2 percent for the hedge funds.
As usual, Buffett did not mince words in expressing his astonishment as to how elite investment professionals could register such mediocre returns while raking in steep fees.
“I’m certain that in almost all cases the managers at both levels were honest and intelligent people. But the results for their investors were dismal — really dismal,” he wrote. “And, alas, the huge fixed fees charged by all of the funds and funds-of-funds involved — fees that were totally unwarranted by performance — were such that their managers were showered with compensation over the nine years that have passed.”
5-13-15NYTimes "Big Insurers Send a Wake-up Call to Hedge Fund Investors"
NYTimes 3-29-16 U.S. Accuses Wall Street Scion of $95 Million Fraud
- Log In - The New York Times
A 39-year-old Wall Street executive, Andrew Caspersen came from a life of privilege and opportunity: Groton, Princeton and then Harvard Law School, where the student center is named after his family because of a generous gift from his father.
Hedge Fund Sales Pitch Casts a Spell on Public Pensions
5-18-15NYTimes "Volatility Prompting Hedge Funds to Close"
- Log In - The New York Times
"The average hedge fund returned 3 percent last year compared with a 13.7 percent gain for the Standard & Poor’s 500-stock index."
9-20-14NYTimes "Slamming the Door on Hedge Funds" by Gretchen Morgenson
- Log In - The New York Times
"Citing high costs and complexity associated with its holdings in 24 hedge funds and six so-called funds of funds, Calpers said the investments were “no longer warranted.” Hedge funds typically charge 2 percent of the assets they manage and an..."
9-16-14NYTimes "Top U.S. Pension Fund Says It Is Done Investing With Hedge Funds"
- Calpers Done with Hedge Funds
" Hedge funds have underperformed the S& P 500-stock index for the last five years... In 2013, for example, the average hedge fund returned just 9.1 percent, according to the data firm HFR. That compares with a 32.4 percent increase in the S.&am
7-22-14NY Times--Sleazy Tax Avoidance by Hedge Funds Aided By Banksters
"A Senate investigation has found that hedge funds — in particular, James H. Simons’ Renaissance Technologies — used complex financial structures to claim billions of dollars in tax savings."
5-9-14NYTimes OP-ED "Now that's Rich!" Paul Krugman
- Log In - The New York Times
Once you might've argued with a straight face that this wheeling and dealing was productive, that the financial elite was providing services to society commensurate with its rewards. But, now, the evidence is that are a bad deal for everybody.
2-6-14NYTimes--Former SAC Trader Guilty of Insider Trading
2-6-13 Wall Street Journal--SAC Portfolio Manager Convicted of Insider Trading!
A jury found former SAC Capital Advisors portfolio manager Mathew Martoma guilty of insider trading, a verdict that burnishes prosecutors’ trial record in such cases in recent years but doesn’t directly affect the firm’s founder, Steven A. Cohen.
Mr. Martoma was convicted of taking part in what prosecutors say was one of the largest insider-trading schemes ever—illegal trades on two pharmaceutical companies that helped SAC and its traders book profits and avoid losses worth a total of $276 million.
1-3-14BloombergBusinessWeek-"Why SAC Capital's Steven Cohen is Not in Jail"
10-31-13NYTimes Cohen Art For Sale
- Steven A. Cohen to Sell Works at Sotheby’s and Christie’s - NYTimes.com
Steven A. Cohen is selling some $80 million in art at Sotheby's and Christie's this fall, though people close to him say the sales are not an effort to raise money for his mounting fines and legal fees.
10-17-13 NYTimes "SAC Capital Reaches a Tentative Insider Trading Settlement $1 Billion"
- SAC Capital Reaches Tentative $1 Billion Settlement
SAC Capital, the embattled hedge fund indicted on insider trading charges, has reached a tentative deal to settle the case and pay more than $1 billion in fines. The fund, run by billionaire Steven Cohen, struck the deal with federal prosecutors acc
8-17-13NYTimes- As SAC Investors Jump Ship, SAC Cuts Back
- As Investors Jump Ship SAC Cuts Back
"It looks to the final months of 2013, SAC’s prospects are grim as the fund, while operating under a criminal indictment, prepares to become leaner with virtually no outside investors...."
7-22-13NYTimes--Government Case Reveals Cohen's Links to Dubious Transactions at SAC
- Case Reveals Cohen's Links to Dubious Actions at SAC - NYTimes.com
In a detailed legal filing, the S.E.C. uses phone records, e-mails and instant messages to paint Steven A. Cohen as a boss deeply engaged in his employees questionable behavior at SAC Capital Advisors.
7-11-13BusinessWeek "Hedge Funds are for Suckers!"
- Hedge Funds Are for Suckers - Businessweek
According to a report by Goldman Sachs released in May, hedge fund performance lagged the S&P 500 index by about 10 % points this year, although most managers still charged enormous fees in exchange for access to their brilliance.
6-4-13NYTimes "A Tale of Wall Street Excess, a Peed Into World of Hedge Funds" by Peter Littman
- A Tale of Wall St. Excess - NYTimes.com
A former trader traces his rise and descent in “The Buy Side,” a memoir about the underbelly of big-money, fast-paced hedge funds.
6-3-13NYTimes "Wall Street Transfixed by SAC Deadline" Peter Littman
- Wall Street Transfixed by SAC Deadline - NYTimes.com
A quarterly deadline for investors to withdraw money from the troubled hedge fund SAC Capital Advisors was the talk of Wall Street on Monday.
3-16-13NYTimes DealBook--SAC No Longer Cooperating in Insider Trading Investigation
- SAC Starts to Balk Over Insider Trading Inquiry - NYTimes.com
SAC Capital Advisors, the hedge fund owned by the billionaire investor Steven A. Cohen, told its investors on Friday that it would no longer cooperate unconditionally with the government's insider trading investigation. Vice closing on Steve Cohen?
6-28-13NYTimes--SAC Capital Manager Arrested on Insider Trading Charges
- SAC Capital Manager Arrested in Insider Trading Case - NYTimes.com
Michael Steinberg, the most senior employee at SAC Capital Advisors ensnared in the government’s vast insider trading investigation, pleaded not guilty. [A close personal friend of Steve Cohen.]
3-15-12NYTimes "SAC Settles Insider Trading Cases for $616 Million"
- SAC Capital to Pay $616 Million in Insider Trading Cases - NYTimes.com
Two affiliates of the giant hedge fund have settled insider trading cases with the S.E.C., for $616 million, in what the agency said was the biggest ever settlement for such cases. No criminal convictions yet.
3-11-13NYTimes--Hedge Fund Operator, Florian Homm, Found and Jailed
- Hedge Fund Manager Found and Jailed in Fraud - NYTimes.com
Florian Homm, who spent five years in hiding, was arrested in Italy and faces extradition to America, where authorities have accused him of defrauding investors of at least $200 million.
1-24-12WallStreetJournal--2 Years in the Slammer for Hedge Fund Operator Doug Whitman
- Professional Article Snippet - WSJ.com
California Hedge Fund Manager Doug Whitman Found Guilty in Manhattan Federal Court on All Counts for Insider Trading Whitman Convicted on Four Counts for Trading on Marvell, Polycom, and Google Inside Information, Earning His Firm More Than $900,00
1-21-13BloombergBusinessWeek "On the Trail of SAC Capital's Steven Cohen"
- On the Trail of SAC Capital's Steven Cohen - Businessweek
30% per year return appears to be too good to be true, and it apparently was too good to be true. FBI, SEC and Justice Department trying to nail billionaire Steven Cohen.
1-22-13NYTimes--Rajat Gupta, Former Goldman Sachs Director, Seeks Reversal of Insider Trading Conviction,
- Rajat Gupta Seeks Reversal of Insider Trading Conviction - NYTimes.com
Lawyers for Rajat Gupta, a former Goldman Sachs director, have made several arguments on appeal. Among the most significant is that the government should not have been allowed to use certain wiretap evidence during his trial.
12-18-12NYtimes--Crook Alert!! Two Hedge Fund Operators Found Guilty of Insider Trading
- "A Tight Knit Circle of Greed"
Anthony Chiasson, co-founder of Level Global Investors, and Todd Newman, former mgr at Diamondback Capital Management, were found guilty of a conspiracy that made more than $70 million illegally trading tech stocks. 6 others pleaded guilty.
12-13-12NYTimes Dealbook "A Longstanding Wall Street Custom of Favoring Performance Over Ethics" by Jesse Eisinger
- When Wall Street Investors Favor Performance Over Ethics - NYTimes.com
Another former employee of SAC Capital Advisors has been accused of insider trading, but the author says investors don't seem to mind, as they continue to put new money into the hedge fund in search of great returns.
12-16-12NYTimes "The Double Life of U of M Medical School Professor Sid Gilman Who Provided Inside Information on His Drug Research to SAC Capital"
- Sidney Gilman’s Shift Led to Insider Trading Case - NYTimes.com
While he appeared a grandfatherly academic, Dr. Sidney Gilman advised a network of Wall Street traders through SAC Capital and eventually crossed the line into criminal behavior.
12-13-12NYTimes "Tiger Asia Admits Improper Trading and Calls it Quits" by Peter Lattman
- Amid Insider Trading Inquiry, Tiger Asia Calls It Quits - NYTimes.com
Tiger Asia, a spinoff of Julian Robertson's Tiger Management, says it will return investor money, as it continues to face an insider trading investigation by authorities in Hong Kong.
12-6-12NYTimes--How Insider Inquiry's Trail Led to Hedge Fund
- Trail to a Hedge Fund, From a Cluster of Cases - NYTimes.com
Federal investigators have charged many former employees of SAC Capital Advisors, the hedge fund run by Steven A. Cohen, with trading on insider information.
11-26-12NYTimes--"New Breed of SAC Capital Hire Is at Center of Insider Trading Case"
- New Breed of SAC Capital Hire Is at Center of Insider Trading Case - NYTimes.com
Mathew Martoma's arrest signals the first time that prosecutors have linked Steven A. Cohen, the founder of SAC Capital Advisors, to possibly illegal trading activity.
7-16-12NYTimes--Hedge Funds Given an Edge--Advance notice of analysts' changes in ratings of individual stocks
- Hedge Funds Tap Into Early Views of Stock Analysts - NYTimes.com
Polling analysts on their outlooks for a given company has become a way for large Wall Street firms to discover trading advantages from information that might not be public yet. The game is rigged against the individual investor!
7-2-12NYTimes Deal Book--In the Caymans its easy to find hedge fund directors
- Hedge Fund Directors for Hire
As a result, dozens of operations have sprouted up on the Caymans to supply directors, from one-man bucket shops to powerhouse law firms. Directors are often Cayman-based professionals: accountants, lawyers and administrators of hedge funds.
7-1-12NYTimes Book Review: Hedge Fund Ancestor: Ferdinand Ward
- ‘A Disposition to Be Rich,’ by Geoffrey C. Ward - NYTimes.com
Geoffrey C. Ward’s great-grandfather, who ran a pyramid scheme, was the Bernie Madoff of the 1880s...."The young man sensed something in the culture. In this era of Wall Street’s flowering, people believed that money could be conjured from the air."
6-30-12NYTimes Samuel Israel--Stranger than Fiction
- ‘Octopus’ Looks at Bayou Hedge Fund’s Collapse — Review - NYTimes.com
In “Octopus,” a new book, Guy Lawson tells the roller-coaster tale of Samuel Israel III and the collapse of the Bayou hedge fund.
6/12NYMagazine--Falcone Calls SEC Charges "a piece of cake!"
The SEC also alleges that Falcone misappropriated $113.2 million in client funds on a loan he used to pay his taxes. He needed cash because he had "begun extensive renovations on his Manhattan townhouses," and made "significant personal expenditures.
6-27-12NYTimes--SEC Poised to Sue Hedge Fund Manager Philip Falcone
- S.E.C. Said to Be Poised to Sue Fund Manager - NYTimes.com
Philip A. Falcone, the hedge fund manager, will fight any charges filed against him, his lawyer said. The S.E.C. has been looking at a $113 million personal loan Mr. Falcone made to himself from his fund and favoritism to Goldman Sachs.
6-27-12NYTimes--Galleon Hedge Fund Official Spared Prison
- Galleon Official Is Spared Prison - NYTimes.com
Adam Smith, a former portfolio manager at the Galleon Group hedge fund who provided the government with crucial assistance in prosecuting his onetime boss, Raj Rajaratnam, avoided prison on Tuesday when a judge sentenced him to two years' probation.
6-25-12NYTimes--J. Ezra Merkin Revealed as Another Hedge Fund Malefactor
- Hedge Fund Manager Merkin to Pay $405 Million in Madoff Settlement - NYTimes.com
J. Ezra Merkin, whose funds lost about $1.2 billion when Mr. Madoff’s fraud collapsed in 2008, has agreed to pay $405 million over three years to compensate his investors.
1-17-12NYTimes--Tech Research "Analyst" Accused of Selling Insider Information to Hedge Funds
- Tech Analyst Arrested in Insider Trading Crackdown - NYTimes.com
John Kinnucan, a technology analyst who gained notoriety last year for openly challenging federal authorities, was arrested on Thursday night, accused of selling inside information to hedge funds.
2-16-11NYTimes--Hedge Fund Operator, Philip Falcone, Losing Big Bet on LightSquared
- Loss of Wireless Dream Caps Philip Falcone's Fast Fall From Grace - NYTimes.com
The F.C.C.'s rejection of LightSquared's broadband plan could spell disaster for the hedge fund manager Philip A. Falcone, who has spent billions of dollars on the project.
2-11-12NYTimes--Hedge Fund's Chief is Charged in Case Tied to Galleon
- Whitman Capital Founder Is Charged With Insider Trading - NYTimes.com
Douglas F. Whitman, the founder of Whitman Capital, surrendered to the F.B.I. on charges of illegal trading in tech stocks using tips from people in the Galleon Group fraud.
1-19-12NYTimes--FBI Makes Insider Trading Hedge Fund Arrests
- U.S. Charges 7 for Insider Trading of Dell Stock - NYTimes.com
Federal prosecutors depicted a "circle of friends," including Anthony Chiasson of Level Global, who together earned about $62 million in illegal gains in Dell stock. [Insider trading is rampant on Wall Street, in my opinion.]
Some Hedge Funds Fudge their Valuations in Quarterly Reports to SEC and to Hedge Fund Data Base Providers
The Wall Street Journal reported on December 30, 2011 on academic studies using statistical analyses which show that some hedge funds' quarterly reports to the SEC on the valuations of the securities in their portfolios are over-stated or under-stated by as much as 10 percent. 'The economists say the results...suggest hedge funds "take advantage of lax regulation by strategically fudging equity position valuations to impress existing or potential clients.'"...The researchers found that the hedge funds whose holdings exhibited the widest discrepancies were more likely to report smoother monthly returns to hedge fund data base providers than were funds who reported accurate valuations to the SEC.
The WSJ article ended up with the question that if there are significant deviations in the reported prices of listed securities, what would a study show about reported prices of harder-to-value holdings such as derivatives, or thinly traded complex bonds.
Some Good Advice for Ordinary Investors
12-12-08 NY Times--Ron Lieber and Tara Siegel Bernard offer some good advice for investors.
5 PERCENT--Any investment has at least a remote possibility of going to zero or close to it. But when you're dealing with hedge funds and other exotic fare, the risks can be bigger, for reasons like leverage and strategy and lying and stealing.
HUMILITY--Investing, in general, requires humility. Few people have enough of it. It is the reason so few people put most of their money in index funds which track various asset classes rather than trying to pick winners. One problem with hedge funds is that they appeal to all the wrong instincts. They are for the privileged. Investors need to have a minimum net worth to qualify. In case of the money managed by Madoff many people seemed to have gotten in by belonging to the right country club. All too often rich individuals make easy marks because the pitch is, "You're special, you can get something that other people can't get."
But you probably aren't special--You probably are hearing about the second or third or fourth tier ideas in the world of alternative investments. Be honest with yourself: If you are in on them, how special could they really be, given the enormous demand for truly unique investment opportunities.
SMARTS--You may be rich and you may be smart. But smart about this sort of investing? Not so much.
RESEARCH--Dong your homework on a sophisticated investment opportunity is not easy. Your financial planner may not have the time or the skills to do a thorough investigation either.
SECRETS--One hard part about investing in hedge funds is that some of the most successful ones will not say much about how they work. If they disclose too much about their tactics, others will copy them and their investors will be hurt.
12-10-11NYTimes--SEC Looks a Possible Fraud in Harbinger's Dealings with Goldman Sachs
- S.E.C. Looks at Harbinger's Dealings With Goldman - NYTimes.com
The S.E.C is investigating whether Harbinger agreed in 2009 to agreed in 2009 to allow Goldman to withdraw up to $50 million from the firm, while not striking similar deals with other clients.
Hedge Funds a Good Deal??
- Hedge Funds a good deal?
More than 180 Hedge Funds Liquidated in the Second Quarter Donna Kardon reports in the Wall Street Journal 9-19-08 that More than 180 hedge funds were liquidated in the second quarter amid volitile...
6-20-11NYTimes--Another Insider Trading Conviction "A little more sugar for the cooks."
- Consultant for Expert Network Is Convicted in Insider Trading Case - NYTimes.com
Winifred Jiau, 43, was charged, tried and convicted in less than eight months, and now faces up to 25 years in prison when she is sentenced in September.
5-22-11NYTimes--Senator Grassley Investigating Insider Trading By Sac Capital Advisors
- Grassley Investigating Trades Made by SAC Capital - NYTimes.com
Senator Charles E. Grassley, Republican of Iowa, is examining 20 stock trades by the hedge fund SAC Capital Advisors, a spokesman for the lawmaker said Saturday.
5-20-11NYTimes--FrontPoint Folds Most Funds Following Insider Trading Investigation
- FrontPoint to Shut Most Funds After Insider Charges - NYTimes.com
The decision to wind down and restructure its business is a surprising reversal of fortune for FrontPoint, which had appeared to have weathered the scandal.
5-12-11NYTimes---The Galleon Insider Network
- The Galleon Network - Interactive Feature - NYTimes.com
Prosecutors have called it the biggest insider-trading case in United States history. On Wednesday, a jury in federal district court in Manhattan found Raj Rajaratnam guilty of 14 counts of securities fraud and conspiracy. He had been accused of maki
5-12-11NYTimes--Rajaratnam's Invaluable Circle of Friends
- Galleon Chief's Network of Friends Who Tell Secrets - NYTimes.com
What made Raj Rajaratnam stand out in the hedge fund world was his deep set of contacts inside Silicon Valley executive suites and on Wall Street trading floors.
12-2-10NYTimes--Hedge Fund High Flyer Stumbles
- Harbinger Hedge Fund Stumbles in Cash Bind
Alarmed by the investigations and uneasy about Mr. Falcones 4G ambitions, investors like Goldman Sachs, the Blackstone Group and New York States public pension fund have asked to withdraw money from Harbinger.
11-18-10NYTimes--Ex-McKinsey Executive Settles Galleon Insider Suit for $2.8 Million
- Anil Kumar, ex-McKinsey Executive Settles Insider Case for $2.8 million
Mr. Kumar said that he received $1.75 million in payments from Mr. Rajaratnam after providing information from 2004 to 2009. Mr. Kumar was a direct investor in a Galleon fund, prosecutors and the S.E.C. contend.
3-29-10 NYTimes--Former Top IBM Executive, Robert W. Moffat, Jr. Pleads Guilty In Galleon Insider Case
- IBM Executive Cops a Plea in Galleon Insider Case
Former I.B.M. senior executive, Robert Moffat, Jr. pled guilty on Mon. to providing confidential information about Advanced Micro Devices and Lenovo to a hedge fund consultant accused of participating in a wide-ranging insider trading scheme.
2-9-10 Intel Insider Sinks Galleon
- Sinking Galleon
Former Intel exec. admitted Mon. he leaked confidential corporate information to his close friend Raj Rajaratnam, founder of Galleon hedge fund. He adds to a list of cooperating witnesses that federal prosecutors are using to build a case against Raj
2-5-10 NYTimes--Burton Malkiel Recommends Index Funds, Knocks Hedge Funds
- Dowdy Index Funds Endorsed by Professor Burton Malkiel
Malkiel, economics prof. at Princeton, has long advocated index funds. What's striking now is his belief that the wealthiest would have fine returns without the volatility and high fees if they simply used indexes to diversify their investments.
7 Indicted in Galleon Insider Case NYT 1-21-10
- 7 Indicted in Galleon Insider Trading Case
Federal prosecutors on Thursday unveiled grand jury indictments against seven people in the wide-ranging insider-trading case involving the Galleon Group and numerous other hedge fund traders, lawyers and corporate executives.
11-12-09 Why Insider Trading is Hard to Define, Prove and Prevent
- Insider Trading is a Murky Concept
"I think there are some libertarians who think we should allow it," says Wharton finance professor Jeremy J. Siegel. "But I think insider trading is not a good thing. It makes it more risky to buy securities..."
11-12-09 NYTIMES--Bear Stearns Prosecutors Screwed Up
- Federal Prosecutors Flubbed the Bear Stearns Case
The prosecution blew it: 1st, in the indictment for conspiracy and fraud, it relied on snippets of e-mails that in their entirety proved to be ambiguous. 2nd, the prosecutors argued that the men were out-and-out liars, which was hard to prove.
11-10-09 NY Times Bear Stearns Hedge Fund Managers Acquitted of Fraud
- Two Bear Stearns Hedge Fund Mgrs. Acquitted of Fraud
A jury in Federal Court in Brooklyn decided that the two managers did not lie to investors by giving an upbeat financial picture without disclosing that the two hedge funds they managed were plummeting and Cioffi had already pulled $2 million out.
11-5-09 NYTimes---14 Charged in Galleon Insider Case
- 14 Charged in Galleon Insider Trading Case
n the latest criminal complaints, prosecutors described a network that used prepaid cellphones to avoid detection, and that was pierced in part through surveillance and wiretaps.
11-7-09 NYTimes--Lawyers Flooded with Questions from Worried Executives on Insider Trading
- Just What is Insider Trading? Is there a big gray area?
Switchboards at law firms have been lighting up in recent weeks as hedge fund managers and technology executives deluge lawyers with one question: What information is safe to share, in case the feds are listening?
11-1-09 NYTimes Rajaratnam Swaggers in the Spotlight
- Raj Rajaratnam is a down-to earth family man and sports fan
For Rajaratnam, the billionaire hedge fund mgr charged with insider trading, legal problems are nothing new. In 2005, he paid $20 million in back taxes, penalties and interest to settle a federal investigation into a sham tax shelter that he used.
11-1-09 IBM Vice President Implicated in Galleon Insider Trading
- IBM Vice President, Robert Moffat Fired as a Result of Galleon Insider Trading Scheme
In the federal indictment, Mr. Moffat was accused of passing along delicate company information about I.B.M.s earnings and the plans of a chip-making partner, Advanced Micro Devices, to a hedge fund broker. Mr. Moffat denied the charges.
11-1-09 Wall Street Journal Galleon and the Trouble with Insider Trading
- Galleon and the Trouble with Insider Trading by Andy Kessler in the Wall Street Journal
The arrest of Rajaratnam puts a spotlight on the insider trading game. Is trading on industry knowledge widespread? Absolutely. That's how some hedge and mutual funds get an edge. Is insider trading also widespread? Only the SEC wire tappers know.
10-31-09 NYTimes Big Investors Grow Wary of Hedge Funds
- Big Investors Wary of Hedge Funds
The bloom is off the rose, but n because of the bad performance, said Sol Waksman, of BarclayHedge. The performance was bad but not letting people redeem their money hurt them more. The Madoff scandal hurt And the news with Galleon is not helping.
10-29-09 NY Times-- Missed Chances to Catch Galleon
- Missed Chances to Catch Galleon Insider Trading Scheme
The first tip from inside Intel reached Rajaratnam a decade ago from the same source who has turned against him in the biggest insider case in a generation...years before the current case erupted, Ms Khan was caught passing information to Rajaratnam.
10-22-09 nytimes Galleon Informant has Checkered Past
- Galleon Informant Provided Tips to Raj Rajaratnam
Roomy Khan, the central witness who brought down the Galleon hedge fund, is a former Galleon employee with a history of financial trouble who agreed to cooperate with prosecutors after she was caught making trades using inside information.
10-23-09 NY Times Witness Has Long History of Supplying Insider Information
10-21-09 One Trade Wiped Out Insider Profits
- Rajaratnam Lost Big on One Trade Wiping Out Insider Profits
Raj Rajaratnam masterminded one of the biggest insider schemes ever. If Rajaratnam was trading on insider information, apparently he wasn't very good at it. The trades that led to his arrest Rajaratnam lost millions from the alleged illegal trades.
10-17-09 NY Times Hedge Funds Unsettled by Galleon Arrests
- Arrests Unsettle Hedge Fund Industry
Rajaratnam's arrest has shaken the secretive hedge fund world, in which intelligence on companies is shared among Wall Street analysts, traders and other investors. To gain an edge, hedge funds use lobbyists, private investigators, connected sources.
9-17-09 Hedge Fund Fees Too High?
- Hedge Fund Fees Challenged by Big Investors
By his calculations, a typical debt-focused hedge fund would need to earn 36 percent more than a high-yield bond mutual fund, which charged a standard 0.5 percent fee, just to achieve the same return.
10-16-09 NYTimes Hedge Fund Operator Charged Insider Trading
- Raj Rajaratnam, Hedge Fund Executive Charged with Insider Trading
The founder of the Galleon Group, a big New York hedge fund, was charged on Friday with insider trading in the stocks of several companies, including Advanced Micro Devices, Clearwire and Akamai, earning about $20 million in the process.
4-1-09 SEC Investigating "Preferential Redemptions" by Hedge Funds
- One More Reason not to Invest in Hedge Funds!
SEC investigating whether hedge funds advisers favored their own interests over investors in liquidations. A record 778 hedge funds liquidated in the 4th quarter of 2008.
1-29-09 JP Morgan Chase sued for putting clients into Madoff funds
JPMorgan Chase is under the gun of lawsuits from European clients who were put into hedge funds that invested their money in accounts managed by Bernie Madoff. The European clients lost $50 million and are claiming JPMorgan Chase failed to do due dilligence on their investments with Maddoff. And, worse, they are claiming that JP Morgan Chase, based on inside information not disclosed to its clients, pulled it's own money out of Madoff shortly before the shit hit the fan, so to speak. Here's a link to an article in today's NYTimes.
Hedge Funds Unhinged NY Times Business 1-17-09
- Hedge Funds, Unhinged - NYTimes.com
Two out of 3 hedge funds lost money last year. How many will claw their way back to profitability? The gilded age of hedge funds is losing its luster. The funds, pools of fast money that defined the era of Wall Street hyper-wealth, are in the throes
12-12-08 HEDGE FUND VICTIMS of GIANT MADOFF PONZI SCHEME
Frauds on Wall Street aren't unheard of. But a $50 billion Ponzi scheme is a bombshell by any standard. Citadel Investment Group said it is halting redemptions. Others likely affected as well by Madoff Ponzi scheme.
The end of the financial World As We Know It--NY Times 1-04-09
- The End of the Financial World As We Know It Lewis & Einhorn NYTimes
Michael Lewis, an editor at Vanity Fair and author of “Liar’s Poker,” is writing a book about the collapse of Wall Street. David Einhorn is president of Greenlight Capital, a hedge fund, and the author of “Fooling Some of the People All of the time."
10-23-08 Hedge Funds Lose their Lustre
- Hedge funds liquidation of assets leads to big market decline.
The gilded age of hedge funds is losing its luster. The funds, pools of fast money that defined the era of Wall Street hyper-wealth, are in the throes of an unprecedented shakeout. Even some industry stars are falling back to earth.
10-14-08 High Flying Hedge Fund Falls to Earth by Louise Story in the NYTimes
- High Flying Hedge Fund Falls to Earth
Remy Trafelet's flagship hedge fund has dropped 26% this year. For the $2 trillion hedge fund industry, a long-feared shakeout is at hand. Some analysts say one out of every ten funds could fold.
7-10-08 Rock Bottom Hedge Fund
- Hedge Fund Operator, John Devaney Describes Rock Bottom
One by one, John Devaney sold his treasures-his Renoir and his Gulfstream, his home and his helicopter. Even his yacht. Devaney, who made and lost a fortune in mortgage investments shut his hedge fund and told investors all their money was gone, too
6-26-08 Warren Buffett Bets on Vanguard Index 500 over Hedge Fund
- Buffett bets on Index 500 Fund
Buffett bets on Vanguard Index 500 Fund over hedge fund because it's very hard for hedge fund to make up for the 2% it takes off the top every year plus 20% of the profits.
Criminal Charges Against Two Bear Stearns Hedge Fund Managers 6-17-08
- Criminal Charges Against Hedge Fund Managers
The funds’ managers, Ralph R.Cioffi Jr. and Matthew M. Tannin, told investors that the funds were in good shape just weeks before the funds collapsed.
Alex Tarquinio on Hedge Funds NYT 3-18-08
- Hedge Funds
An investor worth up to $10 million can achieve a well-diversified, tax-efficient portfolio without resorting to hedge funds. Hedge funds are like the lottery. They can achieve spectacular returns or flame out.
11-9-07 Free Rolls for Hedge Funds (with your money!)
- FreeRolls--Why Hedge Funds and Stock Options are Not a Good Deal for Investors
The compensation terms for hedge fund managers and for many corporate executives ostensibly are designed to benefit investors by rewarding performance by the fund or corporation's top managers. In practice...
3-4-07 NYTIMES---2 + 20 and Other Hedge Fund Math by Mark Hulbert, NYT
- Hedge Fund Math
MANY people would jump at the chance to invest in hedge funds, which have mainly been available to only the wealthy. But a new study finds that the funds’ high fees make it unlikely that investors will improve their long-term results.
3-2-07 NYTimes---Insider Trading Scandal Reaches Far Into Wall Street, Hedge Funds
- Insider Trading/Hedge Funds
Thirteen people were accused yesterday of taking part in the trading ring, including a former Morgan Stanley compliance official, a senior UBS research executive, three employees from Bear Stearns and a Bank of America employee.
Fraud Down on the Bayou
4-15-08 Hedge Fund Founder Sentenced to 20 YearsA federal district judge sentenced Samuel Israel III, co-founder of a hedge fund, the Bayou Group, now defunct, to 20 years in prison on Monday for his role in a cheme that cheated investors out of more than $400 million.http://www.nytimes.com/2008/04/15/business/15bayou.html?scp=1&sq=Samuel+Israel+III&st=nyt
Hedge Fund Operator Ordered to Pay $300 Milion for Defrauding Investors
- Hedge Fund Ordered to Pay $300 million for Fraud
Prosecutors indicted Paul Eustace, founder of Philadelphia Alternative Asset Management Company, on two criminal counts of commodities fraud. The government said Mr. Eustace stole $200 million from clients 2001-2006.
Ron Insana Finds Running a Hedge Fund is Harder Than It Looks
- Insana Folds His Fund of Funds
If there was one thing Mr. Insana had built up over his career in journalism, it was great contacts. He knew everybody in the hedge fund business, which is why, when he started Insana Capital Partners, he chose to create a fund of funds.
Merle Hazard Meets Arthur Laffer
- Merle Hazard Meets Arthur Laffer In the Hamptons and Sings About Hedge Funds
Rock Bottom In The Hamptons by Merle Hazard Hedge Funds--No thanks! Sophisticated Market Analysis
Free Rolls--Why Hedge Funds aren't a Good Deal for Investors
- FreeRolls--Why Hedge Funds and Stock Options are Not a Good Deal for Investors
Hedge fund compensation arrangements do not incentivize performance benefiting investors. In practice these compensation arrangements incentivize managers to take risks with investors' money in the hope of reaping rich rewards for themselves. In othe