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.
Wow… down 10 is a bad year. Down 100% is criminal. This guy should be in jail.
fuck me! that’s gross negligence.
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.
Leverage is helluva drug.
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.
Well, options give you the chance to loose 100% when they expire out of the money. And you can do it every month, or quarter.
I suspect he did something like loading up on commodities options, figuring “it can’t go lower, it’s already down so much.”
And yeah, that’s criminal levels of negligence.
What kind of fool commits 100% of capital to option premium? I can’t believe he would have done such a thing (but you never know).
Well, that’s why it’s criminal negligence.
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.
^ that’s why I guessed he was probably down really bad into year-end, and needed a hail-mary pass to salvage the fund.
It’s like goign to vegas and betting the very last of your savings all on black, because you nearly lost everything
More like betting everything on 15 (black): the payoff on black is only 2:1 while the payoff on 15 is 36:1.
Long oil and short swiss fancs?
This sounds like the $2000 account I blew up when I was in undergrad. Don’t even know if I could replicate that strategy on a 100m fund.
Pretty easy actually.
Just go all in on Forex and commodities with 1:100 leverage.
Only you also run the risk of getting filthy rich in the process.
dont they have risk controls and checks and balances? why did no one say anything? or does this guy have final say?