Owen Li, the founder of Canarsie Capital in New York, said Tuesday that he had lost all but $200,000 of the firm’s capital—down from the roughly $100 million it ran as of late March 2014. “I take responsibility for this terrible outcome,” Li wrote in a letter to investors obtained by CNBC.com “My only hope is that you understand that I acted in an attempt—however misguided—to generate higher returns for the fund and its investors. But even so, I acted overzealously, causing you devastating losses for which there is no excuse,” he added…Li said in the letter that he made a series of “aggressive transactions” over the last three weeks to make up for poor returns in December. He said he bet on stock price options, predicated on the broader market rising. But stock indexes instead fell, causing the huge losses along with several undisclosed direct investments, according to the note.
Li is a former trader at Raj Rajaratnam’s Galleon Group, which collapsed amid insider trading charges.
I’m thinking he invested like a rational manager in the beginning… but made more and more aggressive bets as his performance kept sinking. Then probably made some big final bet that finally sunk the ship.
If you gave me $100M and eight months to lose substantially all of it on purpose in markets, I actually don’t know if I would be able to accomplish that. It’s almost impressive how bad he was.
Is there ever a post mortem on these kinds of collapses? I’d love to know the specific movements that he took. I can come up with all sorts of ways to lose that much that fast, but I never really assumed anyone was dumb enough to do it.
Wait, where did this guy go to school? I knew a guy called Owen Li in college (a few years older than me), and I thought he was on his way to a high flying finance career. It seems like the guy I knew would probably have been too young to have worked at Galleon though, unless he went there right after graduating.
But if you’re trying to lose tons of money, options give you the chance to loose 100%, whereas nearly every other security (other than futures and swaps) has some residual value (barring some economy-wide catastrophe, which doesn’t apply here)
However, I know former fund managers who say that when they are down, the temptation to throw a Hail Mary pass through options is intense, and gets more so the further down you go.