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RE: Bloomberg - How Does This Hedge-Fund Manager Make So Much Money?

Any ideas what trading strategy he could be employing?

“All it does is look at the last trade and calculate trades that would be equivalent of, ‘What if this security increases 50 percent in value in the next three seconds,”’ Meyer says of his program."

8 responses

My first thought was option volatility trades.

Saw the piece on Bloomberg today...keeping with Simon's theme, maybe a big ole diversified portfolio of deep out of $ options?

Looks like a ponzi scheme.

What is really confusing is the 10 year investment term, with a punishment of 1/2 of investment for early redemption. Yet the article states that the majority of the funds are in treasuries. So why would a fund that is so liquid need to impose such harsh redemption requirements?

If the majority of the funds are in treasuries, those are collateral for derivatives trades, either options or futures or swaps or something. Not able to sell them.

Yep good point, but wouldn't that mean that the projected time to unwind the derivatives positions (without negative impact to the market being traded) is 10 years, and the cost of the early unwind (or premiums paid before getting in the money) is 50% of portfolio? I guess it depends on how much leverage is being used and what markets are being traded.

This is most certainly fraud. The reason for the 10 year limit with such a large penalty is to make sure the rate of withdrawal stays below the rate of acquisition keeping his ponzi scheme afloat. In 9 years he will buy himself a one way ticket to Mexico.

This sounds like the most time tested and true investment scheme on Wall Street - good old Ponzi style fraud. He even has the audacity to "guarantee" the return and to hit investors with a 50% early redemption fee. The SEC should investigate this.