John Meriwether

The harder the hedge fund managers’ fall - the more money they lose, the bigger the fat cats - the easier it is for them to raise additional seed capital for another hedge fund idea. So reports The Wall Street Journal this morning in “Rebounds by Hedge-Fund Stars Prove ‘It’s a Mulligan Industry.’”

 

Referring to the golf term “mulligan,” whereby a player is permitted to take another shot after landing in the weeds, some hedge fund executives are remarking on the mixed-up fate of colleagues who lost millions, and in many cases billions, of investors’ and even their own money—only to return to the table a second, and sometimes even a third time, for more.

 

The logic seems to be, those who fell hard obviously are big guns, hedge fund portfolio managers who rank and whose ideas are aplenty. Some are also arguing that their highly leveraged bets on subprime mortgages, sometimes nine times capital in hand, were actually smart calls but that the banks pulled out on them too early.

 

Some, like Jeffrey Larson of Sowood Capital Management, infamous John Meriwether of Long Term Capital Management, Daniel Zwirn of D.B. Zwirn & Co., and Brian Hunter of Amaranth Advisors, are now returning to the markets with new investing ideas, and having no problem raising additional capital.

 

“It’s crazy, but the guy who’s down substantially often will have a lot more options versus someone who hasn’t lost much money,” Neal Berger, head of Eagle’s View Asset Management, told The Journal.

 

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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