Nice Little Earner – 1000% Returns

Last week burningpants reported on how some managed funds in China have managed to return close to twice the amount investors held in their accounts back in January.

However this exceptional performance has now been outstripped by a US hedge fund, which claims to have delivered investors a mind-boggling 1,000% after taking a contrarian (some may say lucky) position on the demise of the US sub-prime market.

Based out of Santa Monica in the US Golden State of California, Lahde Capital is barely a year old and kicked off with the launch of three funds at the beginning of the year.

The three funds – Hedge I, II and V – all have the same strategy of shorting the riskiest tranches of sub-prime securitisations.

The ten fold returns claim to be even after the manager has taken out its one per cent management fee and a 20 per cent performance fee, with investors having to commit a minimum of US$250,000.

Lahde Capital may be a small fish in comparison to some of the giants of the hedge fund world, but the returns are likely to have come at the expense of some of the major global institutions that have posted billion dollar losses due to the collaterised debt obligation market over the past few weeks.

This reinforces a basic lesson in life that for there to be winners, there have to be losers.

This was the case in point last week when Peter Clarke, head of the largest listed hedge fund, Man Financial made his own Lahde-like prognostication by stating that one in ten of all hedge funds will go out of business this year.

Given there are estimated to be between 8,000 and 9,000 hedge funds in existence that means almost one thousand may bite the dust in the foreseeable future if Clarke’s estimate rings true.

If this happens at the smaller end of the chain then there’s going to be a lot of empty garage space out there.