Two stereotypes exist about hedge-fund types. One is that they are a bunch of evil schemers, trousering gazillions from plots to force down wages and force up the price of rice, water and everything else we really need.
The second is that they are a bunch of half-bright poshoes, swanning around Mayfair in cars they can barely drive, taking lavish bets on things they don’t understand with money invested by Daddy’s friends until it is all gone.
There is something in each cliché. Of the two, the second looks to be in the ascendancy.
The latest figures from HSBC show an industry failing to justify its always absurd-looking fees.
The average life span of a hedge fund is five short years — most of them fail, some of them spectacularly so.
When they do, the hedgies don’t return the fees they have collected. They get to keep the Maseratis. The investors get to keep the losses and the resentment.
Lately, the only thing the average fund has successfully hedged against is success. Even dear old Crispin Odey — proper clever, that one — has seen his Odey European fund halve in the past year.
The funds which aren’t fried to a Crisp have hardly added value, either.
Seldom has so much been given to people who have done so little.
One hedgie quoted at the weekend said: “The hedge fund industry is… supposed to be an alternative investment class but HSBC’s results show it’s just a poster child of conformity.”
Indeed. Away from Harry Hedge Fund, today’s merger of Rathbones and Smith & Williamson shows the pressure being felt in the wealth management industry. No money is changing hands in this all-share deal, you will note.
Expect more funds, more managers, to seek safety in numbers, if only to disguise that their own aren’t up to much.
Poverty of ideas
Shareholders reap rewards as dividends hit $5 billion a day, says a headline in The Times. On the one hand, this has to be good news, a result for pension funds and the rest.
On the other, it does rather suggest that businesses awash with cash have zero good ideas about what to do with it.
A company with a large pile of cash could invest for the future, take a bet on new technology, or (just imagine this!) pay its staff better.
All of these things would be good for society.
Instead, as Sir Martin Sorrell has pointed out, they are effectively abdicating responsibility for these things to investors.
If it is true that pension funds are better allocators of capital than chief executives, what are the chief executives for?