You know times are bad when you see a former hedge fund manager standing on a street corner of a tony Connecticut town offering to work — any job — for low seven figures.
Those rip-roaring, billion dollar junkies have hit the skids. Investors are bailing. Withdrawals are through the roof. Fees and profits are through the floor. And the priests that ruled the flock have, in many cases, been defrocked.
So what happened? Start with a gyrating stock market that’s scared the hell out of practically everyone. Add a crusading SEC. Chaos in Europe, a smoldering Middle East, a slow down in Asia and, just for laughs, Ebola. That’s market spook in real time.
These days, money managers demand Uncle Sam’s safe 2 percents over any risky hedge investment. And that’s what hit my pal Harry London’s Hubris Fund.
Harry was a small fish, if you call a guy who made $10-$15 million a years small. And he spent every dime.
Then two years ago, the markets turned. His clients hung on, then gradually withered. Sure he had assets: watches, furniture, some suits. Two mortgages … on the same house. Everything else, leased. Ten years, nada.
By last week, Harry was breathing the fumes of his four remaining clients.
When his oldest — and best — called Friday, Harry was forced to close his beloved Hubris with a press release that afternoon. No media bothered to call.
He was still hungover Monday morning when his cell phone rang.
“Harry, this is Bob Whiteshoes with JPMorganthal. I’m the trustee of the Hedge Fund Guarantee Corporation and since you’re now ‘retired,’ pardon the pun, I wanted to review your benefits.”
“Ah, Bob, I think you’ve got the wrong person. But it’s a nice thought.”
“Harry, according to my notes, when you first opened you ran into Steve Cohen of SAC and Ken Griffin of Citadel at the Hedge Fund Roundtable. They told you about the HFGC and our 1/8 of 1 percent fee on your gross revenues program. You signed up, and obviously forgot all about it.”
“Obviously, I remember the meeting but I thought it was a one time deal that never paid off. And I assumed that monthly fee was a government program like FDIC. So what’s my take. Like $50 grand a year?
“Harry, are you sitting down? First, would you like a penthouse in the City or a home in Malibu. You can live anywhere. You can a have a second home in the Islands, too. You’ll draw an initial $2.4 million annually, plus cars, live-in help, premium health care, etc, etc. And it was all Roth front-end loaded; i.e., tax free.”
“Bob, how long do these benefits last. I mean, interest rates are practically zero today.”
“Good point, Harry. Actually the funds are tied to an index based on the price of Apple stock, Steve Cohen/SAC’s net worth and options on 2016 World Series tickets for the San Francisco Giants. So, when the Fed boosts interest rates next year, you’ll really be living like a king again.”
Bill Regardie was the founder and publisher of Regardie’s Magazine.