PAAMCo Chief Says It's 'Horrible' Time To Start Hedge Fund

Dec 8 2011 | 10:54am ET

Jane Buchan, chief executive of the $16 billion Pacific Alternative Asset Management, says it’s a “horrible environment” to start a hedge fund.

Speaking during Reuters Investment Outlook Summit in New York, Buchan said managers will find it increasingly difficult to justify their traditional 2-and-20 fees for the type of returns they’re delivering.

"Investors have to look at the fees versus the value," she said, according to Reuters.

Kynikos Associates founder Jim Chanos, addressing the same gathering, agreed. Although Kynikos started out with $16 million and grew that, over more than two decades, to $6 billion, he says his success will be hard to duplicate:

"Now, you can't do that," said Chanos. "If you can't raise nine figures right out of the box, it is going to be very difficult, and you won't attract institutional money."

The average hedge fund, according to Hedge Fund Research, was down 4.37% through November and Chanos, for one, is somewhat surprised investors are still accepting the 2-and-20 fee structure.

"You would have thought that competitive pressures would have hit a lot earlier," he said.

"The hedge fund industry is looking more like the sports industry where players have a limited time to be at the top of their game and earn a lot of money," said Buchan.

That said, Chanos still believes hedge funds are the best option for investors seeking higher than normal returns.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

The Cult of Loss Aversion: A Call to Rethink Risk in Global Macro Investing

Sep 4 2014 | 5:45am ET

In the wake of a traumatic loss, whether it is financial or personal, it is just...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.