The Daily Alpha: Real Talk on BlueCrest Capital, EnerVest and Kid Rock

Jul 17 2017 | 12:13pm ET

Returning to normal scheduling this week, we discuss the value of walking away from clients, the incredible vanishing energy hedge fund, and why Elizabeth Warren is worried about Kid Rock.

Quotes of the Day

"We are going from earning 2 and 20 on clients' money to earning 0 and 100 on our own.”

That’s BlueCrest Capital Management’s Michael Platt on the company’s decision to stop taking outside investor money about a year ago. During a trip to Bloomberg TV, the hedge fund manager talked about the firm’s 30% gain so far this year and the 50% return in 2016.

The returns came after the fund saw significant redemptions during a four-year span due to lackluster performance. The company decided to just walk away and become its own client.

Seems like it’s worked out well. 

"We are not proud of the result."

That’s John Walker, EnerVest's co-founder and CEO.

Walker’s private equity firm isn’t… how do we put this? They aren’t… well… they aren’t good with money.

The firm was once worth more than $2 billion. But as The Wall Street Journal explains, the company is going to be leaving their pension, endownment and charity clients with pennies on the dollar. The company started investing in the energy markets with crude prices around $90 per barrel.

You know where this is going, right?

The interesting factoid here is that there have only been seven private-equity funds worth more than $1 billion to ever lose client money. Losses of 25% are rare, according to the Journal’s article.

EnerVest really outdid itself.

Don’t be surprised when Democrats go after hedge fund and private equity managers; you'll hear a lot about this fund and what it did to pensioners' money. This is the extreme example of what can go wrong.

And politicians love to make the extremes look like the center of the bell curve.

"I know a lot of people are thinking, "This is some sort of joke, right?"

That is Massachusetts Sen. Elizabeth Warren.

In an e-mail to her supporters, Warren has warned Democrats to take the Senatorial campaign of one man seriously. And that man… is Kid Rock.

Yes, Kid Rock is considering a run for Senate in his home state of Michigan. And if there’s one thing the American kakistocracy needs… it’s Kid Rock.

Sen. Debbie Stabenow, whose seat Kid Rock would target, is actually taking to Twitter and talking like a politician. "I know we both share a love of music. I concede he's better at playing guitar and I'll keep doing what I do best: fighting for Michigan,” she recently wrote.

She sounds too much like a politician. If Stabenow wants to keep her seat, she doesn’t need to talk about social issues. She needs to hit him where it hurts the hardest. 

She just needs to point out that this man wrote the song “All summer long” and nearly destroyed the iconic Allman Brothers’ hit “Sweet Home Alabama” in the process.

Monday Hedge Fund Reading List Hedge fund to seek seat on Procter & Gamble Co. board

Reuters: Bullish oil funds lead hedge fund losers at half-year mark

Institutional Investor: The Incredible Shrinking Hedge Fund Industry

Financial News: Hedge funds feel the chill as investors find better alternatives

FTSE Markets: Global alternative AUM swells to almost $6.5 trillion, says Willis Towers Watson

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The Daily Alpha is published on FINalternatives. Signup here for the daily FINalternatives Newsletter, which includes the Daily Alpha. 

Follow @FINalternatives  Be sure to check out the award-winning Modern Trader and a very special offer for first-time readers and follow @moderntradermag. You can also pick up a copy of the June Hedge Fund issue at Barnes & Noble.

Garrett Baldwin is the voice of the The Daily Alpha, the features editor for Modern Trader magazine, and the author of The Man with The Big Red Balloon.


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