The Value of “Top Talent”

By James Kwak

From a Wall Street Journal article about The Children’s Investment Fund:

“[The fund] lost 43% in 2008, among the worst losses by a hedge-fund that year.”

“Both investors and employees defected during the crisis, with top talent leaving to start hedge funds of their own.”

“But with a 30% return in 2012 and a 14% gain this year, TCI has crossed its high-water mark.”

Makes you think.

7 responses to “The Value of “Top Talent”

  1. It does, since 43% loss would require a 75% gain to counter. It may have done so including years 2009-2011, but not just since then, and it would have required you to stay for the party. Volatility is extremely costly for long term returns, and 0 for five years brings down the average a bit.

  2. wallyfurthermore

    It just confirms what we all know, doesn’t it?

  3. Just say no. Passive funds can be shopped. The more passive the easier it is to pick. You can’t shop for active funds. They may perform for insiders or when they’re new but you as a punter never know when a particular fund runs out of accessible opportunities. And that’s just volatility caused by the active management, before you add the market.

  4. Huh? Here’s a scenario: before 2008 the top talent was in risky investments, and in the downturn they got hit harder then most. They left, and the lesser talent dumped everything in less risky, closer-to-market performing investments, and hence (roughly like the market) their more passive approach got them back to even (years later as another commenter pointed out).

    So what was your point exactly? That lesser talent (over multiple years) was able to recoup the losses of a single year of top talent?
    Replace Buffett with me at the bottom of the financial crisis (Berkshire shares were down at least 30% for a while I think; and note that I’m removing the artificial constraint of you using calendar years) and let me sit there passively, and lo and behold we’d be back to break even. Man, I’m as good as Buffett! Talent is BS!

    Maybe it is, but unless I missed your point, this example doesn’t show it.

  5. CHILL

    Here’s some comic relief for what could otherwise be a terrible waste of a bad mind:

    http://unemployedman.com/

    (Click on the poster graphics for detail: Master of Degrees (perennial favorite), KOKUA (being in Debt never had it so good), Kollectus (materialism at its best), White Rage (Fox-ified), Wonder Mother, Invisible Hand)

  6. The Childrens Investment Fund donated a portion of profits to charities.
    This is because it was tax efficient.

    http://www.guardian.co.uk/money/2008/jul/09/charitablegiving

    He doesn’t give to charity like normal tax payers do, in fact he doesn’t pay tax at the rate that normal people do.

    Christopher Hohn was nothing more than a mediocre tosser then and is no different now.
    Any idiot could have made money prior to 2007 given an over sized ego attached to overzealous behaviour. Of course the financiers loved him, he shorted companies until hostile takeovers allow asset stripping, leveraging and then resale which generated huge fees and commissions.

    He started out by shearing sheep for a living and then muscled in on other farmers.
    He is an idiot because he thinks that the financiers he was working with are his friends.

    They aren’t, they shear farmers.