Carol Loomis: Hard Times Come To Hedge Funds (Repeat)

This is a great find via Finance Professor.  The article reflects Carol Loomis’ original work on Hedgefunds in the 1970’s. What can we say,  it’s a fantastic read especially for those financial history buffs. Thank you very much Professor! Click Here To  Skip The Introducion & Read The Full Article On The 1970’s Hedge Fund Mania

Article Introduction (Via All About Alpha)

As you will see, the similarities between the hedge fund world of 1970 and that of 2008 and truly amazing – almost eerie in fact.  Even the 39 year old Warren Buffett makes a cameo in this piece.  As Motson pointed out to us, “…if you re-scale the numbers it could have been printed yesterday.”

The bizarre parallels begin with the article’s very title: “Hard Times Come to Hedge Funds“.  It goes on to chronicle the travails of the $1 billion industry (as a point of reference, the US mutual fund sector managed about $50 billion at the time).  FORTUNE estimated there were 3,000 investors in about 150 hedge funds by 1970.  Most funds were launched between 1966 and 1970 and “the great bulk” were registered in Manhattan (that’s just south of Greenwich, for those who may not remember the old days).

Article Excerpts (Via All About Alpha)

Here are the kind of sentences Loomis penned:

“…some today are troubled about their hedge fund investments.  Their misgivings are something new, for until recently, the hedge funds looked like an investor’s dream.  The records they produced were consistently lustrous, and it seemed as if their structure was ideally geared to success.”

“…there is some disagreement these days as to the definition of a hedge fund…it would appear that they key feature of a hedge fund is neither the hedge nor the leverage, but instead the method by which the general partners are compensated.”

““The trouble began, he says, in the 1966-68 period when the craze for performance swept the investment world and when all sorts of money managers, including those in his own shop, got overconfident about their ability to make money…Even Jones himself was caught up in what he describes as the “euphoria” of the times.  He says he began to wonder…whether his hedging strategies, which has aimed as softening the effects of a potential market decline and which had therefore held back his gains in a bull market, might not have been misguided.”

Click Here To Read The Full Article On The 1970’s Hedge Fund Mania