Berkowitz Responds to Einhorn

[thepupil]

said it much better than i could

[Parsad]

I apologize for furthering the tangent away from JOE, but here is an example of L/S vs. a concentrated best ideas type fund.

 

SEQUX has a 40 year track record, a great research staff, and puts money into the very best ideas.  They get a 1% flat fee. This is one of the most respected research-intensive funds in the world.  RCG has AUM roughly 3x Sequoia and I don't know what they fee on their SMA business (or even if its long only), so caveat emptor.

 

Contrast this with all of the Tiger funds that run high gross, low-medium net exposure funds that get 2/20.  Mandel, Halvorsen, Ainslie etc are all billionaires because they add alpha on the long and the short side.

 

You can become a billionaire selling collateralized loan obligations that are worthless as well...it's been done as we all know.  My point wasn't that you can't become rich from a short book or that people aren't willing to pay for it, just that the institutional money is stupid and thinks that they need to pay short managers to reduce volatility (not risk) from portfolios.  It's modern portfolio theory and I cringe at that...just like I cringe every time I hear someone say the word "alpha"!  Cheers!