So I heard the term Ferrari Syndrome from my new employer the other day. We were talking about the lifespan of hedge funds and he says to me that in some cases, young hungry financiers turn into lazy degenerates once they start making some bucks (ie buying toys, homes, cars). This term Ferrari Syndrome is also in the book Hedge Hunters by Katerine Burton. Does the limo driver have any good stories about rising stars washing up once the money and lavish lifestyle swallow them up?
Im not sure about rising stars but it does seem that for most they have a level that they needed to reach. Could be income level, could be a dollar figure, could be material objects. The had the desire to reach that and didnt think beyond so when it happens they don`t know what to do. When they hit that they think its done and they can cruise…
I’ve also heard the reverse. A hedge fund manager will have a bad year. As we all know, they get paid on performance. The bad year will drop asset levels, some clients will bail. The manager then sees what a small asset level he is working with and realizes even if he can dig himself out of the hole, the incentive pay above the high water mark will be garbage. So the hedge fund manager bails out, and the hedge fund closes.
One kid drove this ferrari and parked close to me at work so I asked him about it. He said it was actually the companies marketing budget and his boss let him park it in his driveway and drive it on the weekends so people would see it. What you say makes sense people in this business are notorius just like retail cleints for thinking if they had a good year it will continue forever. So they sit at the computer and do projections. The worst is when people think that their comp will continue to compound at some consistant rate forever or if it goes down it will continue decreasing forever. If x happens for the next 50 year I will have y
manager bails out and hedge fund closes = read RIEF
I’ve witnessed the Ferrari Syndrome firsthand. The highly (overly) paid managers started spending a good majority of their days looking for toys to buy with their new found wealth. Long story short, they took their focus off the clients and the clients are now leaving in droves.
I generally see it the other way round – the people who are successful enough to make big $ are generally the ones who are motivated to succeed under any situation, so I can’t think of a lot of people in this industry who’ve struck it rich and turned complacent. Even the hedge fund managers like Jeff Vinik who put up huge numbers quickly and then closed down their funds ended up running other smaller investment firms with personal capital, but they never just quit and go sit on the beach. That’s not to say it doesn’t happen in other industries, where people are less ambitious and are working for the sake of working instead of experiencing some sort of job satisfaction. I do get a sense that there are a lot more people who get discouraged by failure and give up than people who give up because they got too rich. P.S. I don’t know what itstoohot has against Renaissance all the time but just because RIEF is losing money doesn’t mean Simons is going to close down and give up his $2 billion annuity from Medallion any time soon.
Somebody I work with just bought a new Ferrari last week. I always see it now in the parking garage. He’s driven it to work every day. What’s funny is his commute is about 15 blocks.
XSellSide Wrote: ------------------------------------------------------- > The highly (overly) paid managers Please define “overpaid”. If a manager personally generates $100 million of net income for the firm and makes $10 million while the firm keeps $90 million, is that considered overpaid?
Totally agree with JTLD that those managers who have what it takes to truly make it big will never put it on cruise control or quit. I think we are talking about the mid-level guys who maybe work for a great firm, achieve some level of success and financial security and then mentally check out. You see that all the time in this business.
JohnThainsLimoDriver Wrote: ------------------------------------------------------- > XSellSide Wrote: > -------------------------------------------------- > ----- > > The highly (overly) paid managers > > Please define “overpaid”. If a manager personally > generates $100 million of net income for the firm > and makes $10 million while the firm keeps $90 > million, is that considered overpaid? It depend, he’s underpaid if he has direct equity in the firm i.e. if he generates $100 mil he keeps $10 and if he loses $100 mil he pays out $10. But he’s overpaid if he generates $100 mil and keeps $10 and if he loses $100 mil he keeps 1 or .5.
No, I’m not a hater, just stating the facts. i don’t know how you come up with $2 billion figure but the last time i checked RIEF was charging some % on AUM and some % on profits depending on share class you own. So don’t think RIEF is a +$10 billion AUM fund anymore, internet says somewhere around 5-6bil. And also heard they banned the use of black ink until the junk rally ends. Add the redemptions and the fund is done. Medallion is a different story.
LBriscoe Wrote: ------------------------------------------------------- > It depend, he’s underpaid if he has direct equity > in the firm i.e. if he generates $100 mil he keeps > $10 and if he loses $100 mil he pays out $10. But > he’s overpaid if he generates $100 mil and keeps > $10 and if he loses $100 mil he keeps 1 or .5. So that would basically make almost everyone in America overpaid because no one (except for equity partners) gives back their compensation when their company generates negative net income.
itstoohot Wrote: ------------------------------------------------------- > No, I’m not a hater, just stating the facts. i > don’t know how you come up with $2 billion figure > but the last time i checked RIEF was charging some > % on AUM and some % on profits depending on share > class you own. So don’t think RIEF is a +$10 > billion AUM fund anymore, internet says somewhere > around 5-6bil. And also heard they banned the use > of black ink until the junk rally ends. Add the > redemptions and the fund is done. Medallion is a > different story. Medallion resets at $5.4BB every year. Last year it was up about 100% gross of fees. They charge a 50% performance fee on Medallion assets, so $5BB in profits x 50% = $2.5BB in fees. That doesn’t include Simons’ gains on his own investment in the fund. So you’re right, I’m probably low balling him on the $2BB number.
He’s over paid if indexing would have earned anything over $80M JohnThainsLimoDriver Wrote: ------------------------------------------------------- > XSellSide Wrote: > -------------------------------------------------- > ----- > > The highly (overly) paid managers > > Please define “overpaid”. If a manager personally > generates $100 million of net income for the firm > and makes $10 million while the firm keeps $90 > million, is that considered overpaid?
Only a small percentage of most people’s wages are tied to the performance of the company.
JohnThainsLimoDriver Wrote: ------------------------------------------------------- > itstoohot Wrote: > -------------------------------------------------- > ----- > > No, I’m not a hater, just stating the facts. i > > don’t know how you come up with $2 billion > figure > > but the last time i checked RIEF was charging > some > > % on AUM and some % on profits depending on > share > > class you own. So don’t think RIEF is a +$10 > > billion AUM fund anymore, internet says > somewhere > > around 5-6bil. And also heard they banned the > use > > of black ink until the junk rally ends. Add the > > redemptions and the fund is done. Medallion is > a > > different story. > > Medallion resets at $5.4BB every year. Last year > it was up about 100% gross of fees. They charge a > 50% performance fee on Medallion assets, so $5BB > in profits x 50% = $2.5BB in fees. That doesn’t > include Simons’ gains on his own investment in the > fund. So you’re right, I’m probably low balling > him on the $2BB number. If you wanna show the world know how much you know about the Medallion, fine. But i’m not talking about the Medallion if you look at my first post^^^^.
Like I said, I don’t know anyone who is forced to give money back when the company loses money, so by your definition everyone on a salary is overpaid.
itstoohot Wrote: ------------------------------------------------------- > JohnThainsLimoDriver Wrote: > -------------------------------------------------- > ----- > > itstoohot Wrote: > > > -------------------------------------------------- > > > ----- > > > No, I’m not a hater, just stating the facts. > i > > > don’t know how you come up with $2 billion > > figure > > > but the last time i checked RIEF was charging > > some > > > % on AUM and some % on profits depending on > > share > > > class you own. So don’t think RIEF is a +$10 > > > billion AUM fund anymore, internet says > > somewhere > > > around 5-6bil. And also heard they banned the > > use > > > of black ink until the junk rally ends. Add > the > > > redemptions and the fund is done. Medallion > is > > a > > > different story. > > > > Medallion resets at $5.4BB every year. Last > year > > it was up about 100% gross of fees. They charge > a > > 50% performance fee on Medallion assets, so > $5BB > > in profits x 50% = $2.5BB in fees. That doesn’t > > include Simons’ gains on his own investment in > the > > fund. So you’re right, I’m probably low balling > > him on the $2BB number. > > If you wanna show the world know how much you know > about the Medallion, fine. But i’m not talking > about the Medallion if you look at my first > post^^^^. You said you didn’t know how I came up with the $2BB number. I just explained it to you.
Thanks, very nice of you. Can you do the same math for RIEF fund please?