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Flash commentary on why Weiss Multi-Strategy Advisers went bankrupt Conclusion up front: seems to be a classic example of failed hedge fund succession planning How it went down: 2023 - Weiss approached buyers, including Izzy Englander’s Millennium. Talks collapsed when Englander discovered that top talent, such as PM Andrew O’Connor, was leaving. Millennium pushed for more favorable terms, including removing CIO Jordi Visser. February 29, 2024 - George Weiss told his group of PMs to “sell, sell it all” in tears. Weiss’ biggest creditor demanded debt repayment that Weiss couldn’t fulfill. April 29, 2024 - Weiss filed for Chapter 11 bankruptcy, 46 years after it was founded. Employees speak highly of George Weiss, who doesn’t swear and insists others don’t. However, he gave other executives, such as Visser, too much autonomy. Can’t blame Weiss when he was basically retired. HR notified employees that they would receive “limited severance,” and some traders would not receive their deferred compensation, which could be up to 7-figures. Amid all the turmoil surrounding the firm’s dissolution, Jordi Visser appeared on a podcast titled “How to Unf-ck Your Future.” Causes of Weiss' bankruptcy: · Not due to a single London Whale-type blowup · Paying executives too much even during the poor performance and declining AUM. For example, Deputy CIO Mike Edwards lost more than $100 million between 2020 and 2023 and stopped trading as a result. · Unlike their multi-manager peers, Weiss was too lenient in not cutting underperformers and did not employ a pass-through fee model to clients. The firm stopped charging clients for various expenses and, when it made no fees because of underperformance, still had to pay PMs who did make P&L. · Executives racked up miles on the corporate jet, Dassault Falcon. Creditor Leucadia (an affiliate of Jefferies Group) made Weiss sell the jet. · Bloated back office staff: 110 employees for a $2.8 billion AUM firm, with $3 million rent for a Park Avenue office location. · Jordi Visser, the CIO, had side hustles of video podcasts and newsletters and had a romantic relationship with the Director of IR and Marketing, making the Weiss data team do analytics for his own social media endeavors. He had a volatile temper and was abrasive (reminds me of Tiger Global setup). Poor track record: blew up his own hedge fund, Anchor Point Asset Management, and ran a book at Weiss but did so poorly that the firm had to shut it down.. Source: Bloomberg

UK investment trusts faced issues before Brexit, but now the nail is in the coffin. "Investment trusts, a cornerstone of UK equity markets with roots stretching back more than a century, have seen a gap open up between their share prices and the value of the assets they hold while they battle the worst year for raising capital in a decade. The discount, which stands at an industry average of 9 per cent to net asset value, has put some investment trusts on the brink of being wound up or targeted by hedge funds including Paul Singer’s Elliott Management and Boaz Weinstein’s Saba Capital." For investors, if you can accept illiquidity, there are some interesting assets and strategies. #investmenttrusts #equities

Schulte partner Daniel Hunter recently spoke with 9fin for their article, “Hedge funds want in on private credit – but are they ready for it?”     Private credit is highly popular on Wall Street today, as many hedge funds are seeking to enter the market. The appeal of private credit lies in its potential for higher returns, with direct lending funds showing better performance than credit hedge funds in recent years. However, the fundraising environment has become challenging, and there has been a notable drop in capital raised compared to previous years.      The issue of deploying capital and working with sponsors and lenders to do so arises when funds are building a brand for themselves. Dan explains how hedge funds’ diverse portfolios could provide managers with a broader view of market opportunities, which would allow funds to adjust their strategies to meet investor expectations for returns. With regard to the potential downsides associated with the higher flexibility to invest across the capital spectrum, Dan advises, “They just have to make sure that they don't get stuck upside down in the trades, like certain hedge fund managers did in venture capital.”      Newer private credit managers face stiff competition and must prove their track records to attract investors, potentially facing increased scrutiny from LPs as to why they are entering the market. Alternatively, new entrants can buy loans that other firms have already originated when they are beginning to build their businesses.      Read the article: https://bit.ly/3KTqBf5      #SchulteLaw #SchultePrivateCredit #PrivateCredit

For the past half-decade, our Alpha Strategy has consistently delivered positive returns every single month. Our CEO and Asset Manager, Bas Kooijman MSTA, expressed his delight about this achievement: “In a market environment that has been nothing short of challenging, our Alpha Strategy’s ability to consistently deliver positive returns month after month is a clear indicator of the value we bring to our investors.” We hope to continue delivering positive outcomes for our investors in the future. Read the full article about our achievement here: https://lnkd.in/dAEXF8tN #hedgefunds #assetmanagement #fund #dhfcapital

Top REIT ETFs · Vanguard Real Estate ETF (VNQ) · iShares U.S. Real Estate ETF (IYR) · Real Estate Select Sector SPDR Fund (XLRE) · iShares... #apartment #apartmentinvesting #investing

The illiquidity premium is back! For several years after the GFC, during which many #hedgefunds and FOFs suspended redemptions, it was widely understood the investors should demand much higher returns from illiquid assets. That lesson was lost by the end of the Go Go 2010s. (Cue: Cliff Asness of AQR Capital Management or Dan Rasmussen of Verdad Advisers.) The article below from Harriet Agnew, Will Lauch and Costas Mourselas of the Financial Times highlights how institutions overcommitted (read: leveraged) to #privateequity, are not getting their money back on time and how this is having a knock on effect on other #alternatives categories. The practical implication is that allocators are likely to once again place a premium on strategies, like #ctas and #riskpremia, that add #diversification yet are inherently liquid. Hedge funds hit by lack of private equity exits

Why should retail investors avoid private funds like hedge funds and real estate syndications? 👇 🎯 The dispersion of returns between the best and worst performance is HUGE 🎯 It's very hard to predict who will outperform in advance https://lnkd.in/giT4YnKQ

"What about Warren Buffett?" If it’s possible to beat the market, as Buffett has for decades, why would anyone settle for market returns from low-cost index funds? It’s a valid question. Since Buffett took control of Berkshire Hathaway in 1965, the stock has returned an annualized 19.8% through 2023, nearly double the S&P 500. If you can find the next Warren Buffett before the fact, of course you should invest with them. But that’s easier said than done. As Warren Buffett will tell you, he is no longer the obvious answer to beating the market. Berkshire Hathaway underperformed a Vanguard U.S. equity index mutual fund for 22 years ending October 2024. Buffett was asked about underperformance at the 2020 shareholder meeting. He mentioned that his best year was in 1954 when he was managing a relatively small amount of money, but it’s gotten harder to outperform with larger amounts. The problem is well known: diminishing returns to scale. The larger an active manager’s base of assets gets, the harder it becomes for them to outperform. He makes no promises about beating the market going forward. This point is also made in a highly cited 2004 paper. Investors identify skilled managers based on performance and allocate to them up to the point that they can no longer beat the market. https://lnkd.in/gb-TTg_M Skilled managers have large funds, but their returns are in line with the risk they take. (That could be achieved cheaper and more reliably with an index fund.) Buffett agrees. In his 1996 letter to shareholders, he explains: “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees.” In December 2007, with $1 million on the line, Buffett bet Protégé Partners that they couldn't pick funds that would beat an S&P 500 index fund over 10 years. They picked five funds-of-funds with over 200 underlying hedge funds. Buffett won the bet easily. In his 2013 letter, Buffett explains his advice to the trustee for the assets left to his wife in his will: "Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund." In his 2016 letter, Buffett acknowledges that there will be some successful managers: “There are, of course, some skilled individuals who are highly likely to out-perform the S&P over long stretches." "In my lifetime, though, I’ve identified – early on – only ten or so professionals that I expected would accomplish this feat.” Ten or so. In his lifetime. That’s something to think about. Buffett concludes this section of the letter with this: "Both large and small investors should stick with low-cost index funds.” Buffett is held up as proof that active management works. The trick is finding winning managers before the fact, which is not easy. Buffett is no exception. Rather than trying to replicate Buffett's success, most investors should take his advice: Invest in low-cost index funds.

Investing in distressed properties may not always sound like an enticing strategy, but for hedge funds, it presents unique opportunities with substantial benefits. First and foremost, distressed properties are typically purchased at significant discounts. - These properties are often sold well below their market value, allowing hedge funds to acquire valuable assets cheaply. - This low acquisition cost provides a strong foundation for high returns on investment. Let's delve deeper into the key advantages: **1. High Return Potential** Distressed assets, once refurbished or properly managed, can yield exceptionally high returns. - By rehabilitating these properties, hedge funds can significantly increase their market value. - The difference between the purchase price and the improved value represents considerable profit margins. **2. Diversification of Portfolio** In any investment strategy, diversification is crucial. - Adding distressed properties to an investment portfolio diversifies risk. - Real estate often behaves differently from financial markets, providing a hedge against market volatility. **3. Tax Benefits** Investing in distressed properties can also offer attractive tax benefits. - Governments may provide tax incentives or rebates for investing in and revitalizing these neglected assets. - Additionally, depreciation allowances over time can further enhance financial outcomes. **4. Social Impact** Investing in distressed properties doesn't just benefit hedge funds; it also positively impacts communities. - Revitalizing these properties can lead to improved neighborhoods and increased property values for surrounding areas. - This act of community improvement can also enhance the hedge fund's reputation as a socially responsible entity. **5. Strategic Market Entry** Distressed properties can provide a gateway to enter previously inaccessible markets. - High-value markets that were formerly out of reach can become viable options through distressed asset investments. - This allows hedge funds to expand their geographical footprint and exploit new growth opportunities. To summarize, hedge funds benefit remarkably from investing in distressed properties, leveraging discounted purchase prices, high return potential, and tax incentives. They not only diversify their portfolios and hedge against market risks but also foster community growth and social responsibility. By strategically targeting these undervalued assets, hedge funds can unlock substantial financial gains while contributing to societal development. What are your thoughts on investing in distressed properties? Have you experienced any notable successes or challenges? Let's engage in a conversation on how we can further explore and optimize this investment strategy. #HedgeFunds #InvestmentStrategies #DistressedProperties #RealEstate #Finance #CommunityDevelopment