Ray Dalio - a long profile

From the New Yoker

Soros Retiring

Bloomberg has the story.

Druckenmiller Quits

One of the hedge fund great is retiring. Bloomberg has the story with some interesting infos on the man who broke the ERM.
From the article:
"He made some of his biggest trades working with Soros, including one that cemented Soros’s reputation as a preeminent speculator: A $10 billion bet in September 1992 that the Bank of England would be forced to devalue the pound.

Breaking the Bank

By August of that year, Druckenmiller said he had initiated a $1.5 billion trade that would profit if the German mark rose versus sterling. He expected Europe’s exchange-rate mechanism, in which the currencies moved against each other within a limited band, to come under pressure as Germany raised interest rates to prevent inflation after reunification. Germany’s move forced the United Kingdom and other members of the ERM to decide whether to increase rates, which could damage their already troubled economies, or devalue their currencies and fall out of the ERM.

Druckenmiller said he calculated that the Bank of England didn’t have enough reserves to prop up the currency, and it couldn’t afford to raise rates. He was right, and selling by the Soros fund is credited with pushing the pound out of the ERM.

“He was so proud because until that point Soros had never made $1 billion on a bet,” said Roger Entress, a Pittsburgh surgeon and early Duquesne investor, who was golfing with Druckenmiller at the National Golf Links of America in Southampton, New York, the weekend before the devaluation."

Millennium's Englander on Hedge Funds

Dealbook has the keynote address. Due Dilligence a la Englander: make sure that
(1) Alignment of interests between manager and investors is in place
(2) The manager has sufficient skin in the game
(3) The strategy really is what you are looking for.

Easy!

Hedge Fund Tidbits

WIRED has a brief interview with Peter Thiel, co-founder of Paypal who runs Clarium Capital. Over at Bloomberg Katherine Burton (author of Hedge Hunters) updates us on Steven Cohen, whose track record, art collection and fee structure must be the envy of many.

A Nice Little Conversation

Ineichen has a nice three parts conversation on the crisis, finance, asset management, hedge funds, regulation, bananas. Full of re-usable quotes such as "Life is a tragedy for those who feel, but a comedy to those who think" or "It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so."

Here is part 1
Here is part 2
Here is part 3

Blue Sky for Bluecrest

Here is a nice profile of Michael Platt, co-founder of hedge fund firm BlueCrest Capital Management Ltd. Lucky guy he won the Fiat Cinquecento painted by Hirst at a charity buying 20 5000GBP tickets. Most likely an other good trade.

Hedge Funds - Bridgewater Associates

Read this article on the world's largest hedge fund. (H/T abnormalreturns)

Madoff - A Long List of Red Flags

Prof. Greg N. Gregoriou and François-Serge Lhabitant just published an interesting EDHEC position paper on the Madoff scam highlighting a long list of red flags worth noting:

Operational Red Flags:
Lack of segregation amongst service providers
Obscure auditors
Unusual fee structure
Heavy family influence
No Madoff mention
Lack of staff
SEC registration
Extreme secrecy
Paper tickets
Conflict of interest

Investment Red Flags:
A black-box strategy
Questionable style exposures
Incoherent 13F filings
Market size

They mention that early sceptics (see Mar/Hedge and Barrons' articles from 2001) were ignored and had no impact and conclude: "Let us hope that this will serve as a reminder that the reputation and track record of a manager, no matter how lengthy or impressive, cannot be the sole justification for investment."

Hedge Funds - Paulson & Company

Thanks to DealBook for providing its readers with Mr Paulson's year-end shareholder letter. Mr Paulson has had a fantastic run with his various funds capitalising very nicely on his bearish views on subprime, credit and financials. The letter is definitely worth a read. It illustrates first why some hedge funds will for sure stay in business as some of the opportunities they foresee need specialists' know-how: "Distressed mortgages, distressed debt, debt restructurings, bankruptcies, strategic mergers, etc...". Their 2009 outlook may be of interest as well. "We remain bearish on the outlook for the U.S. economy and believe the recession will extend into late 2009 and likely into 2010. The sharp contraction in the global economy, the instability of the global financial system and the ongoing credit contraction are unlikely to be resolved in the first half of 2009".