Monday, January 12, 2009

Former Peloton Co-Founder Convinces Soc Gen To Fork Over Money

Remember Peloton Partners, the $2 billion hedge fund that spectacularly lost all of its capital in early 2008, before the credit crisis really hit its stride?  One would think that the managers of a hedge fund that punted all of its investors' capital would be shut out of any money management opportunities in this difficult environment where even funds with good performance are battling redemptions.  But no.  The Financial Times reports that Geoff Grant, the co-founder  of Peloton has managed to raise approximately $130 million for a global macro fund, most of it from Soc Gen.  It's funny that a guy who missed one of the largest macro events of the last 50 years and was such a bad risk manager that he lost all of his investors' capital in about a month will now be running a global macro fund.   
Blowing up a hedge fund or a Wall Street trading desk and then quickly moving to another fabulous money making opportunity used to be a common theme.  The twisted thinking goes as follows: "he made a bunch of money before he lost it all, so he can make a bunch of money again."  For some reason, however, I thought that John Meriwether had finally put this ridiculous notion to rest.  After blowing up Long Term Capital and nearly taking down the entire financial system in 1998, Mr. Meriwether went on to found JWM Partners.  Everything was going swimmingly, until we hit another credit crisis, similar to 1998, but more severe.  JWM Partners dropped 43% through November 2008 and has halted redemptions.  The thing is, if you're going to suffer catastrophic losses every time the market has its big credit correction every 4-10 years, you have no business managing money.  You have learned nothing from your previous mistakes, and you're just a one trick pony who only makes money in bull markets.  Even a monkey can make money in a bull market.  The secret to being a good investor is making it though the bad times and being around to take advantage of good opportunities when markets get crazy.
So, Mr. Grant, you get a second chance.  Let's hope you learned your lesson the first time around.  As for Soc Gen, well, at least Mr. Grant's fund will be a better bet than the one they made on Jerome Kerviel.

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