There is a crisis is hedge funds unfolding.
Many are incapable of really providing consistent performance and they are really just following the talking heads if not adding to the nonsense. Noe Jake Gottlieb, the founder of Visium, has announce they are shutting down their $8 billion hedge fund.
Besides poor performance, they are under investigation in another insider-trading scandal where they are accused of using insider information from a Food and Drug Administration official to place trades on drug companies ahead of key FDA decisions from about 2005 through 2011.
Then two other former Visium portfolio managers, Christopher Plaford and Stefan Lumiere, stand accused of deliberately miscalculating the price of securities in order to charge investors inflated fees and mislead them about the fund’s liquidity.
The fund peaked in 2013 with a return of about 18.5% according to their balance sheet. Nonetheless, Visium’s flagship fund was down 9.3% this year through May, while its competitors were up 0.2%.
This is three years of declines suggesting they were incapable of managing the funds of that size. One of the greatest problems in management is the larger the fund, the more difficult it becomes to perform.
Most funds are clueless with respect to timing no less price. They tend to trade fundamentally with some technology that is only a flat model incapable of actually truly seeing the global perspective. This is why there are more funds closing than opening these days.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.