I’d lever up that last 200k to bet that Bro was the counterparty to the 999.8m. Just saying.
I actually made a 10x leveraged bet that paid off against that 999.8 notional. I wasn’t going to brag, but since you called me out, let me tell everyone based on that windfall I will soon be retiring from AF.
Yeah, I learned my lesson on naked options positions with NG in early 2009. Sounds like he should have lost some money in his PA before f’ing around that badly with the fund. Here’s the thing: if he just had bad returns, sure he gets fired. Then he finds another job. Instead, he went for the hail mary, missed, and now he’ll be basically blacklisted from the industry. Rightfully so, if he cannot even compute that risk/reward trade off he has no business picking investments.
lol captures it perfectly
I don’t see the problem. Nobody would be complaining if all worked out. If the investment policy was speculative, I don’t see the negligence…shit happens. Funds are up and down 60%+ every year. Are you supposed to liquidate when you’re down 70%? Nope, keep trying. Always keep trying to fly the plane. Now, someone should have let him know that a martingale betting system only works with unlimited capital and does not have a positve return expectation. I don’t think I would want to pay someone just to keep doubling down, but there are people with money willing to do just that.
Agree 100%
Just because a PM loses money doesn’t necesarrily mean some crybaby is allowed to scream “negligence”
the problem is that he can be sued if he deviated from his mandate. Funds typically don’t have a Free For All invest-in-anything mandate.
What’s comical is that nobody gets violated for deviations if they made money. Shouldn’t there be just about as many enforcement actions on the winning side as the losing side? For example, if your target is less than total market vol and equal or greater returns and you made 3X in a year, shouldn’t the SEC be knocking on your door? Pretty hard to prove either way. “I came to conclude that my portfolio should have a beta of 0.8 going forward, but it turned out to be 3.0, Sue me?” I’ve seen all sorts of portfolios that in theory “should” have been safe, but blew up. Anybody short CHF wasn’t necessarily negligent based on their mandate. Shit happens.
^mike sortino would disagree
Yeah, pretty sure every core/core-plus fixed fund that has ever outperformed ever have a ton of exposures technically outside their mandate. Ever.
Wasn’t it Frank? But yeah, good defense.
The thing is, no one will admit this, but most investors don’t even really read the offering docs. It’s like dozens of pages of legal and technical stuff, ain’t nobody got time for that. Except when you screw up, then people read it and want to hold you to the letter of everything.
By the way also, I won’t say nobody because it’s a big world, but I’m going to say nobody invests in unhedged options strategies that have 100% risk of principle loss. Options-based funds have some of the most sophisticated risk control software to measure exposures of any funds on the planet. The amount of software horsepower and quantitative aptitude is generally at a level beyond the comprehension of most of the people on this forum, myself included (by a long shot). You don’t just lose 100% of your capital real quick like that. Even leveraged CDS funds in 2007/2008 did not lose all their money that fast, and most of those were only “hedged” through “diversification” within the same asset class (all of which turned out to be worthless).
Don’t know all the details, but 99% chance this guy very badly deviated from his stated strategy.
May be for smaller institutions, but for larger ones they definitely have legal teams that pore over the sub docs…granted this guy was not likely taking money from sizable investors at 100M.
If markets open 20% lower tomorrow, all sorts of funds just blew up. Many are not protected for that kind of move. Protection is a return drag, especially over the last couple of years. When it happens to everyone, it’s just the market. When it happens to one guy, people scream negligence. Nobody said life is fair.
Methinks this guy just learned about the Martingale betting system the hard way.
Big investors are looking for everything to the letter and often would rather accept lower returns for more infrastructure and compliance. Smaller investors want returns without a lot of hassle. That’s generally been my experience.
Though it would be easier to be mad if it were your money that was gone…
He a good boy